The Wonder from Sweden: Is IKEA’s Success Sustainable?

INTRODUCTION
IKEA is a well-known home furniture seller worldwide. Since its inception in 1943 by Ingvar
Kampard the company has been developed rapidly. It is the world’s leading retailer of furniture,
renowned for its Scandinavian design. With majority of IKEA’s furniture sold in flat pack form,
ready for the consumer to assemble [ CITATION sta211 \l 1033 ]. IKEA is a household name in the
global ready to assemble (RTA) furniture market [ CITATION sta211 \l 1033 ]. The company
provides many wide range of products including products like lighting, home and office décor
and many equipment’s. All IKEA stores offer this large range and customers can place orders
online via their websites [ CITATION bus19 \l 1033 ]. IKEA’s stores also include typical Swedish
foods restaurants and cafes. They also include small food stores that sell Swedish delicacies, all
from popular meatballs to jams.
Low prices are a pillar of IKEA’s concept, as they encourage customers to shop at their stores.
This low-cost approach is complemented by a diverse range of well-designed practical products [
CITATION bus19 \l 1033 ]. IKEA products cater its customers from all ages and all kinds of
families for every lifestyle and phase. This is especially important in times when the retail sector
is struggling, since it expands IKEA’s potential market [ CITATION bus19 \l 1033 ].

1. SWOT ANALYSIS OF IKEA

Strength
 Customer knowledge: IKEA’s deep awareness of its customers is one of the company’s
core competitive advantages. The company recognizes the buying factor which affects
the customer to buy and follow the best practices to induce this decision [ CITATION
Ovi13 \l 1033 ]. IKEA offers a wide range of products at a very low price range. In the
eyes of the consumers, designers are continuously developing new items that consumers
find appealing. All products are designed to make transportation and assembly easy.
 Product portfolio: IKEA has quite different businesses, contrary to its other larger
competitors. The company manages restaurants, buildings, and flats in addition to its
furniture products [ CITATION Ovi13 \l 1033 ]. Despite the fact that the company’s primary
business is designing, producing, and selling furniture, it is less influenced by the
changing market conditions than other furniture retailers [ CITATION Ovi13 \l 1033 ].

Weakness
 Negative publicity: In 2013 IKEA is operating in more than 40 countries and has faced
many negative publicity regarding things like poor employee care, lobbying and low
 quality of goods and services. Because of the company’s great brand awareness negative
publicity is spreading rapidly in particular through social media [ CITATION Flo13 \l 1033 ].
Customers have also claimed that IKEA’s product quality has been degrading over time
which is leading to dissatisfaction and damaging the company’s brand reputation.
 Standardized products: IKEA focuses primarily on providing standardized, high quality
goods and services to its customers at low prices. However, standardized products cannot
meet all market requirements [ CITATION Uma19 \l 1033 ]. Certain countries in which IKEA
products are manufactured do not implement to control working conditions. This can lead
to weak link in IKEA’s supply chain and affect customer’s opinion of their products
[ CITATION bus19 \l 1033 ].

Opportunity
 Expansion to other countries: IKEA has a huge opportunity to expand its brand to other
countries. The company currently operates in the majority of developed economies but
has not taken a firm step into developing countries [ CITATION Ovi13 \l 1033 ]. In order to
sustain future growth the brands business operations should be expanded in the emerging
markets where there are many untapped customer bases that can be considered for
effective profitability [ CITATION man21 \l 1033 ].
 Green business model: IKEA can also focus in increasing its environmental business
conduct. For example designing successful strategies for ensuring that a fair share of
sustainable cycling and reusing goods is provided to increase its business opportunities
[ CITATION Flo13 \l 1033 ].

Threats
 Competition: Strong market forces in the furniture industry may impact on IKEA’s
market value. Many furniture companies have entered the market due to consumer
demand and expected returns form household and furnishing markets [ CITATION bus19 \l
1033 ]. IKEA needs to strengthen its exclusive competing qualities in order to compete
with their rivals.

Greatest threat to IKEA

In order to meet IKEA’s future growth objectives, IKEA faces two major problems, both in its
supply chain and its customer diversity. Talking about IKEA’s supply chain, the company is
highly dependent upon wood. Wood is a resource that is not only limited but is also linked with
climate change. In view of constant rise in the price of wood and a decrease of overall sales
associated, IKEA will face the risk of profitability and its reputation as well [ CITATION Pau12 \l
1033 ]. And secondly due to IKEA’s global standardized practices there will be a change in its
logistics due to certain countries legislation which causes weak link in its supply chain. The
second threat is the cultural differences in various IKEA’s market. IKEA in the past has failed to
understand its consumers taste and preferences according to their culture and requirements. The
company must understand the host country value system before entering the host country
[ CITATION Uma10 \l 1033 ].

Addressing the challenges

There are two ways to solve the supply chain challenges. First of all, IKEA needs to identify
wood replacements that will enable it to maintain modern designs, deliver quality and keep the
price of the products low [ CITATION Pau12 \l 1033 ]. The company can use materials such as
plastic pallets, which weight less, maintains flexible loads, less susceptible to moisture and 100%
recyclable [ CITATION Hea12 \l 1033 ]. Secondly the company must draw up a detailed plan on its
strategic changes (logistics, marketing and so on) to avoid major crashes like bad design, late
deliveries and stock.
In the case of cultural differences IKEA should properly understand the sociocultural
characteristics of each regions. IKEA needs to adapt and deliver offerings that meets the needs of
each target markets of different regions, gaining a strong foothold in the market against
competitors [ CITATION Pau12 \l 1033 ].

4. STRATEGY DEVELOPMENT METHODS

Organic development
 AR app: IKEA can improve its strategy development by creating an AR app. Augmented
reality is the current trend in 2013, with this application IKEA can combine the preview
and catalog capabilities in which the customers have the ability to purchase directly from
the Swedish home dealer in the future and helps to connect to a wider adaptation
[ CITATION war19 \l 1033 ].
 Smart home automation: Smart home products are a huge market, IKEA has the
opportunity to make customers live simpler and more intuitive by investing in it. With the
integration of modern technology IKEA can integrate shorting buttons to connect all
IKEA’s intelligent devices such as lights, speakers, switches to create a home smart user
experience [ CITATION bor21 \l 1033 ].

Merger
 Diversification: Through amalgamation two or more companies in various fields may
diversify their activities. Diversification is less risky because different companies already
deal in their respective lines [ CITATION bus21 \l 1033 ]. IKEA may face many problems in
marketing or in production but with amalgamation it puts together different people’s
perspective in various activities [ CITATION bus21 \l 1033 ]
 Economies of scale: A merged company will have more resources under its control than
a single company. This will contribute to increasing the scale of operations and large
 economies. [ CITATION bus21 \l 1033 ]. These economy will occur due to increased use of
distribution network and see a cost reduction due to R&D.

Strategic alliance
 Strategic alliance will support the multinational furniture retail to the greatest extent
possible. With the benefits of strategic alliance IKEA can integrate new technologies to
its products which makes simpler to maintain good CRM and create a new technology
standard in a competitive environment [ CITATION cor21 \l 1033 ].
 One of the primary advantages for IKEA in forming a strategic alliance is that it helps to
enter a new market by leveraging resources and market knowledge of a company that has
already established itself in that market [ CITATION Sam19 \l 1033 ]. This can be
particularly helpful for IKEA to understand the market and develop strategies and
distribution channels [ CITATION Sam19 \l 1033 ].

ANSOFF GROWTH MATRIX

 Market penetration: IKEA should conduct market penetration whenever it promotes its
current goods in the existing market. IKEA’s first approach must involve giving
discounts or lowering rates. IKEA should implement this before launching a new product
[ CITATION ada20 \l 1033 ]. This strategy helps boost market share, increase revenue, and
eliminate product inventory before launching a new product. In order to promote IKEA’s
products, the company should form strategic alliance with local brands [ CITATION ada20 \l
1033 ]. And aggressively market its products through all available marketing channels.
 Market development: Market development can be an intensive strategy for IKEA due to
its global scope. This strategy is very important for IKEA’s growth due to it can expand
into new markets using the company’s established products such as launching a new bed
in American markets after their release in the Europe which helps IKEA to create a new
market segment [ CITATION VIC19 \l 1033 ].
 Product development: Product dominance should be major intensive growth strategy for
IKEA considering the company’s product dominance is in its mission and vision
statements. By implementation of this strategy IKEA can expands its iterative innovation
which results in better versions of the existing product [ CITATION VIC19 \l 1033 ]. It has
also helps in increasing customer loyalty, decreasing time to market and providing higher
quality service [ CITATION int21 \l 1033 ].
 Diversification: The occasionally diversified business operations of IKEA group
maintain adequate revenue sources and distribute risks through industries and market.
The company should focus more on its diversification by engaging in different
businesses. Diversification into a new company will entail IKEA to pursue new business
concepts and options for growth and development. This can be done typically through
acquisition and mergers of more small firms and have no link to its current offerings.
 It is not surprising that developed countries like the USA are among IKEA’s fastest growing
foreign markets because the U.S market size is equivalent to that of the European market
[ CITATION Pau12 \l 1033 ]. Also it’s not surprising that IKEA has the most growing international
markets for emerging countries like China and Russia because they belong to the BRIC countries
which is a very interesting market [ CITATION Pau12 \l 1033 ].
In order to be successful IKEA’s first challenge is to figure out how to respond successfully to a
specific markets peculiarities in order to be profitable, which will be discussed in the pestle
analysis.

PESTLE ANALYSIS
 Political: Since IKEA stores in more than 40 countries are open, the company must
comply with each of countries regulations. Bills or political influences in certain
countries may be identical or different. Importing and exporting foreign goods can be
difficult if the government is unfriendly [ CITATION Kie18 \l 1033 ]. IKEA depends on such
relations otherwise their revenues is at stake.
 Economic: The GDP, per capita revenue, inflation, buying power and other factors of the
specific countries have an effect on IKEA’s operations [ CITATION mba201 \l 1033 ].
 Social: Social and cultural factors can also have a profound impact on IKEA and their
profits. IKEA can face challenges if the company does not understand local nuances
before entering any of the international markets. It is important to respect local’s market
social and cultural values [ CITATION Abh15 \l 1033 ].
 Technological: One of the challenges IKEA faces is in its technological aspects. IKEA
has to rapidly update and maintain the changing business environment and technology
rapidly in order to compete with the rivals. The company has to heavily invest in R&D
and increase technology to keep customers satisfied [ CITATION mba201 \l 1033 ].
 Legal: Legislation affects IKEA’s working culture in different countries. Countries may
differ in protective laws and standards [ CITATION Ant13 \l 1033 ]. Every country in which
IKEA operates has a plethora of laws and regulations that must be followed. Since
they’re physical shops, keeping with labor law is important [ CITATION Kie18 \l 1033 ].
 Environmental: Most companies are now putting a strong emphasis on environmental
sustainability and creating a better brand image. IKEA which uses wood for majority of
its products has faced many backlash which leads to low brand image. The company has
to show serious commitment to sustainability and invest in wood alternatives if they want
to continue for a long period of time [ CITATION Abh15 \l 1033 ].

CORPORATE SOCIAL RESPONSIBILITY

 Gender equality and minority: By addressing the issue of gender equality and minorities
within the company, IKEA can integrate in its CSR. The aim of gender equality is to
enjoy equal opportunities, rights and responsibilities for men and women across the
board, equally share the distribution of powers and authority and enjoy equal
opportunities for financial freedom [ CITATION Rud20 \l 1033 ]. IKEA should avoid gender
 discrimination and ensure equity in terms of recruitment, salary, and promotion including
participation and decision making as many of their employees are women.
 Employees: Through educating and developing their workers, IKEA will educate and
inspire them to strengthen their CSR efforts. By proper training IKEA can help their
employees to gain new skills and knowledge while focusing on growth and potential
success of employees [ CITATION Rud20 \l 1033 ]. This also shows that IKEA is
demonstrating its commitment to issues such as human rights, and encourages
volunteering and promotes personal and professional development [ CITATION Rud20 \l
1033 ].
 Sustainable sourcing: In order to improve its CSR, IKEA needs sustainable sourcing and
waste reduction. Sustainable sourcing helps IKEA in long term saving, more sustainable
and productive usage of natural resources, and a reduction in pollution and waste
[ CITATION Rud20 \l 1033 ]. Role materials such as cotton and wood can be sourced from
more environmentally friendly sources by IKEA. IKEA can also train and support their
suppliers for their business standards.

 Style: One of the leadership transition challenges IKEA could face is leadership style.
Ingvar Kamprad the founder of IKEA considered his leadership style to be one of the
IKEA’s core values. IKEA has also been given a very distinctive organizational culture
by a number of other Kamprad’s essential qualities including humbleness, faith in
admitting his shortcomings, caring for all his staff and growth, and as well as constant
need to be revitalized [ CITATION Sar21 \l 1033 ]. Which created a relaxing working
atmosphere in which employees felt they were handled by a father instead of a boss.
 Skills: When the seniority of leadership positions rises, so do the requirements for good
interpersonal skills. Ingvar Kamprad is able to persuade others, communicate, connect
and sell his vision, which created trust and garner support from a diverse range of
stakeholders [ CITATION DrT18 \l 1033 ]. Transitioning a leader may lack this skill which
can lead to issues relating to understanding of culture, people and even politics [ CITATION
Mar21 \l 1033 ].
 Strategy: Often when a transition of leadership occurs, leaders are looking to change the
strategy of the company in response to competitive environment. IKEA could face
problems when the leader actively work against the strategic changes [ CITATION Chr08 \l
1033 ]. They may participate in actions such as sabotage of attempts of reforms, advocate
the same things, actively oppose changes or creating coalitions to resist change which can
affect the strategic growth of IKEA [ CITATION Chr08 \l 1033 ].
 Staff: When transitioning a leader many of them experiences issues relating to their staff.
They have trouble creating strong systems and procedures for managing staff
performance and behavior [ CITATION bri21 \l 1033 ]. Leaders may also have no learning or
development mechanism in place, insufficient supervisory oversight and minimal
management training or skills [ CITATION bri21 \l 1033 ].
When there is leadership transition ikea may face many challenges. As the new leader he/she
may never contribute