Competitive Analysis of IKEA and Challenges Faced in Trading Across Borders

Business Project

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
PART 1............................................................................................................................................1
Competitive analysis of IKEA with explanation of how a business activity of the firm
provides the firm competitive advantage ..............................................................................1
Challenges faced by the company when trading across borderers ........................................1
PART 2............................................................................................................................................1
Discussion of what IKEA needs to enhance their business with the help of appropriate
theoretical tools .....................................................................................................................1
CONCLUSION ...............................................................................................................................1
REFRENCES ..................................................................................................................................1

INTRODUCTION
In the current corporate world business organisations need to build an effective business
strategy to accomplish business objectives and gain competitive advantage in their industry.
Business strategy is defined as a set of plans, action and goals which help the compete in a
particular market. Business strategy assists business firms expand on a global scare and
overcome obstacles conducting commercial activities across borders. Corporations are able to
enhance their business operations with the help of an effective business strategy. Business
strategy provides a vision about the future direction of the organisation. This sets clear goals for
each staff member of the company and prevents them from losing sight of their corporate aim. In
order to ensure wise decision making processes, it is vital that corporations formulate strategies
to support business functions and operations. Communicating this strategy plays an important
role in its successful implementation. This is because it is important for staff members to
understand the goals and direction of the company while external parties need to understand for
what the organizations stands for. In this report IKEA is taken as the base company. IKEA is one
of the top multinational Swedish home furnishing company, it was founded in 1943 by Ingvar
Kamprad being the world’s top biggest furniture retailer from 2008. Company deals in selling
prepared to gather furniture, kitchen and home items also home goods and services. The IKEA is
famous for using modern as stylist design for the various furniture and home items their interior
designs and furniture are mostly connected with eco friendly ease, company creates and offers
ready to assemble furniture along with home ware and food products. This report includes
competitive analysis of IKEA which focuses on understanding competitive position of IKEA in
international market. in addition to this explanation of the firm’s business activity providing the
company competitive advantage is given in this report. Obstacles faced by the company when
conducting commercial transactions across international regions is also described in this report.
Considerations need to be taken by IKEA in order to enhance their business are discussed in this
report with the help of suitable theoretical instruments.
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MAIN BODY
PART 1
Competitive analysis of IKEA with explanation of how a business activity of the firm provides
the firm competitive advantage
Porter's five forces analysis
This framework is used to analyse the level of competition present in an industry. This
framework helps business firms conduct qualitative evaluation of the firms position in the
industry. The results gained from this analysis can be used to create effective business strategy
which helps the company gain competitive advantage in their industry (Bele, Panigrahi and
Srivastava, 2017).Porter's five forces analysis of Swedish company IKEA is provided below:
Bargaining power of suppliers: This element of the framework focuses on determining
the level of power exercised by suppliers on the company. High bargaining power of suppliers
results in suppliers charging exceedingly high prices for raw material while low bargaining
power of suppliers enables the company to purchase high quality products at low price. This
force affects profitability of the company. In context of the Swedish firm IKEA the bargaining
power of suppliers is low. The main reason behind this is the weak financial position of the
suppliers which weakens their power over the company. In addition to this, presence of large
number of suppliers allows the company to easily switch suppliers in situation of price hike. Low
bargaining power of suppliers of IKEA is depicted by the code of conduct launched by the
company which is followed by the suppliers of the firm (Beltagui, 2018).
This code of conduct includes rules related to child labour, minimum wage, hygiene and
sanitation. IKEA conducts 1000 audits annually to check full compliance of these rules by
suppliers of the company. The respective company identifies and removes suppliers which do not
comply with their code of conduct. This business activity of IKEA helps the company gain
competitive advantage by purchasing raw material from socially responsible suppliers which
provide high quality products. The company is not only able to produce high quality products but
also ensures that their raw material is purchased from ethical suppliers which enhances brand
image of the company (Bentley and Gibney, 2017).
Bargaining power of buyers: This component of the framework revolves around
identifying the power of consumers to pressurize the company to lower prices. Price sensitivity
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