Business Strategy for IKEA

This report discusses the business strategy of IKEA, including macro environment analysis, internal environment and capabilities, and Porter's Five Forces analysis. It covers topics such as PESTLE analysis, stakeholder analysis, mission and vision statement, objectives, SWOT analysis, and VRIO analysis.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO 1.................................................................................................................................................3
P1 MACRO ENVIRONMENT OF IKEA..................................................................................3
LO 2.................................................................................................................................................5
P2 INTERNAL ENVIRONMENT AND CAPABILITIES........................................................5
LO 3.................................................................................................................................................8
P3 PORTER'S FIVE FORCES...................................................................................................8
LO 4.................................................................................................................................................9
P4 INTERPRETING STRATEGIC DIRECTION.....................................................................9
REFERENCES..............................................................................................................................13

INTRODUCTION
A business strategy is a set of competitive moves and actions that a business uses to attract
customers, compete successfully, strengthening performance, and achieve organisational goals. It
outlines how business should be carried out to reach the desired ends. IKEA is a European
multinational group that designs and sells ready-to-assemble furniture, kitchen appliances and
home accessories, among other useful goods and occasionally home services. Founded in
Sweden in 1943 by 17-year-old Ingvar Kamprad, IKEA has been the world's largest furniture
retailer since 2008. This report covers questions such as PESTLE Analysis of IKEA, Stakeholder
Analysis, Mission and Vision Statement of IKEA, Objectives of IKEA SWOT Analysis of
IKEA, VRIO Analysis of IKEA, Porter's Five Force Analysis of IKEA. Apart from this this
study also highlights the fact that the company has a lot of room to improve their quality of
products so that retailers who are selling online cannot affect their profitability as the company
already follows the cost leadership strategy.
MAIN BODY
LO 1
P1 MACRO ENVIRONMENT OF IKEA
IKEA is one of the leading company for furniture though the company is also dealing
with kitchen appliances and home accessories, and they must analysis the factors which are
influencing the company's macro factors so that they can make the company work more
efficiently because it is very important for any company to work efficiently (Hernández-Perlines,
Moreno-García and Yañez-Araque, 2016). To work efficiently the company must know the
factors which are influencing the company's growth. In macro environment, understanding and
analysis of the factor like political, social, economic, technological, legal and environmental
factors must be clear with the company so that the company can grow better. The following
report will discuss the factors in detail.
Political Factors
The company is expanded itself in 41 countries and the political factors are very different
from one country to another country. The company which is having a political stability this
company will also have stable economy in the company. The company must have economy
stability because that will make the company stable and will not have to lose a location because
of this factor. Recently China and India have become friendly to the foreign market and the

company will make a great place for itself in the foreign market because of these political factors
and spreading into Asia would be very good for the company (Lozano, 2018). IKEA company is
now jumping to take this opportunity forward so that the company can easily make a profit for
themselves.
Economic Factors
The economic factor plays a very important role in the company of IKEA and other
company's in the world and the world's economy will also play the role in the company. There
are still few country's which are overcoming from the recession which has come in 2008. The
company IKEA studies the behavior of the customers so that they can innovate and create
products for the customers so that the customers get what they want and the company will be
able to maintain their economy (Consultations, Plans and Assistance, 2016). The company uses
the conservative approach for the prices so that the customers think that the company is
providing them with quality products with affordable prices.
Social Factors
The culture plays a very important role in people's life's therefore the company takes
appropriate measures so that they do not offend anyone. The company does not put the same sex
couple pictures when they are promoting their products in Russia because homosexuality is not
acceptable there (HunTer, 2016). IKEA company is now thinking practically so that the
company can make appropriate steps for attracting more customers because it is very important
for the social factors to be considered so that the company is not offending anyone and the
company will be making profits easily.
Technological Factors
The will company have to work on there technology aspect because the competitors have
started to get online and this company is still using the catalogs for their promotions. The
company is not even online yet and it is very important to get digitized because that has a larger
market. IKEA will have to get online because that will not just make the company get more
customers but the workload of the employees in the company will also reduce (Lim, Chalmers
and Hanlon, 2018).
Legal Factors
The country is spread across 41 countries and it is very important for the company to
follow the legal structure of all the countries if the company wants to operate in the other

countries. The labor law is followed very properly in this company because the labor is the
backbone of all the company's and to make the company function the laws are followed very
properly by the company in each country. IKEA company is losing its image in the market
because the quality of the product has reduced and there are a deaths and injuries which are
being cause because of the products which are falling over people. The company is dealing with
these factors so that the company does not have to face any lawsuits.
Environmental Factors
The company has invested $1 billion for the renewable energies in nations which are
poor, and they can not do anything about it so the company has taken the initiative so that the
company can make a change. Company is thinking of investing in wind and solar resources and
also IKEA wants to extract sustainable sources like cotton and wood (Lehmann, 2016).
Stakeholder Analysis
It is very important to know who are the people who will be interested to invest in the
company and who will be able to be a stakeholder in the company because it is because of them
the company is working efficiently and the company by determining these factors then they can
decide the information of the company which needs to be shared. The stakeholder of any
company have to know the full information about the company as to what the future plans are
and what is going on in the company and what has happened in the company before.
Mission and Vision of IKEA
The company's vision and mission are the same which are to provide the customers with
a better life style so that the company can make a profit, and they will be able to grow better. The
company is going to provide the customers with affordable price products so that all the
customers can have a standard lifestyle and life a comfortable life.
Objectives of IKEA
 The company wants to expand itself in more countries and on the top list are China and
India.
 IKEA company want to have a good brand image in the market so that they can get more
loyal customers.
 The company wants to have a competitive advantage in the market (Weber, Geneste and
Connell, 2015).

 The company wants to make furniture which is affordable for the customers all over the
world.
 To earn more profit in the company so that the company works efficiently and makes a
good name for itself in the market.
LO 2
P2 INTERNAL ENVIRONMENT AND CAPABILITIES
SWOT
It is very important for the company to analysis there internal environment so that the
company can work efficiently and to do that the company will have to find out their SWOT.
Strengths, weaknesses, opportunities and threats are the internal factors of the company which
the company will have to work upon so that the company can make a good profit. The report
further will be discussing the internal environment of IKEA and VRIO analysis of IKEA.
SWOT
Strengths
The company knows the customers they are serving to with their products very well and
this is so because the company studies the behavior of the customers properly (Rugman and
Verbeke, 2017). The market research of the company is very good because of this factor and the
company is being able to give what the customers are looking for. With the understanding of the
customers comes uncountable designs because more variety in the products means more market
which the company can capture. The affordability of the products is there in the company which
is making the company get a large brand name and is liked by the customers.
Weaknesses
The weakness of this company is that because the company is selling the furniture at low
price the quality of the product is not good and that is not making the company make a name for
themselves good. The company is not being able to live up to the customers full satisfaction and
expectations (von den Eichen, Freiling and Matzler, 2015). IKEA has a bad press image also
because there have been cases where there have been deaths and injuries because of the products
of the company. Because of the bad press name the company is not being able to grow properly
and the company is not being able to get in loyal customers in the company.
Opportunities

The company has expanded itself in countries which are 41 countries in total but the
company has a great opportunity of expanding itself in the market. The company is thinking of
expanding itself in China and India which will turn out to be a great advantage for the company
and a opportunity for the company. IKEA is not online yet, but they will be starting this market
strategy too because there is a lot of scope for the company to expand itself and the company will
be able to target a larger audience. The company can even push its grocery businesses into
grocery stores because the business and demand of food is increasing rapidly if the company
wants to make a good profit in the future.
Threats
There is fast growing competition in the market for IKEA and the company will have to
find ways through which the company can get a advantage on the competition which is taking
place in the market. The other competitors are already online and the company is not being able
to grow because they are not finding ways to get a competitive advantage and are still using the
old methods (Chang, 2016). The quality of the products which IKEA is selling is not that good
and the customers will slowly turn to other company's which are selling products with good
quality.
VRIO
Valuable
The designs which are being used by the company and the material which is being used
by the company is very valuable and it is very important for the company to maintain a balance
between them. The employees are the best valuable resources of the company because they are
the backbone of the company and without them the company will not be able to produce the
products for the customers (Pisano, 2015). Network of the company with the customers all
around the world is also valuable for them because the customer's satisfaction is the ultimate goal
of the company. The company is using its customers to promote the brand that is another reason
why customers are valuable in this company.
Rare
The strength of the company is its financial aspect because that is very rare for the
company since the other companies can not get there resources like IKEA does. The company is
also expanded itself in the food sector and that is not a rare because there are other companies
who are doing that. Rare are the employees because the company is having trained and skills

employees under them which is the reason for the company being at a place like that in the
market. The company is providing the employees with a good environment to work in so that
they can work in the company for long and the company can have loyal employees.
Imitable
Over the years IKEA has been in this field and during this time the company has built a
stable financial resource which other companies can not do so. The other companies try to do
this they will take the same time IKEA has to achieve this mission, therefore the financial
resource of the company is imitable (Bentley-Goode, Omer and Twedt, 2017). The employees of
the company can be imitable because the other companies can offer better offerings and benefits
to the employees for skilled and trained employees. Even the network this company has is not
easy to be imitable in nature.
Organization
It is very important for the organizations to work properly and the company will have to
make the most from the strategies and methods the company is using so that the company will be
able to make a profit in the market. According to the analysis the company will have to invest in
the right places so that the company will be able to expand and make a good brand image for
themselves in the market (Johnson, 2016). The company will really have to work for the
company so that the company will be able to change the opinion of the press and make them
know the organization is not that bad as it seems because of them. The customers who are not
coming in the company because of these factors will also start trusting the company and the
company will have a larger customer base.
LO 3
P3 PORTER'S FIVE FORCES
Threat of substitute
The company is not doing good because of the lack of promotions of the company and
the press is also not supporting the company. In the recent years it has been noticed that the
company is having a lot of threat regarding the competitors which are coming in the field of
IKEA and that is because there are a lot of lose spots which they can cover and the company is
not doing anything about it (Rothaermel, 2017). IKEA is expanding itself in the new markets
which are China and India and the employees this company have been also trained and skilled

for the kind of work that this company requires but the threat is increasing because the company
is not even online and the other competitors are already online. IKEA will have to get online if
they want to make a place for themselves in the market.
Threat from new entrants
There are a lot of companies which are expanding themselves in this field, but they are
not large scale industries like IKEA is and those companies are investing very low because they
are just experimenting with the market and if they get a good response then IKEA will be in a
great threat. The advantage IKEA has is that they have experience in the field, and they will take
a long time to get to the level of IKEA and by the time they reach IKEA level the company will
already gain more experience and will be able to make the company even better so that the threat
companies can not reach their level in the market (Akter and et.al., 2016).
Bargaining power of buyers
There has been a lot of change in the 21st century which is that now the customers have a
larger advantage than the company has over the customers. This advantage of the company and
customer has shifted because of the competition and technological changes which have taken
place in the market. The pricing strategy the company is using has already made loyal customers
for themselves so that the company will be able to stay in the market for a long time. The
company can manage with the bargaining power of the buyers because the company is already
providing the customers which a lot of variety and prices which they can afford easily (Higgins,
Omer and Phillips, 2015).
Bargaining power of suppliers
The company has multiple suppliers because if one of the suppliers is selling the raw
material for high price the company can pick up the raw material from other suppliers which will
give the company an upper hand on this power. There are suppliers who are dependent on the
company for income, and they will not increase the price so that the company continues to buy
the raw materials from the supplier. There has to be no violations in the company and there is
fair treatment for everyone therefore the company conducts approximately 1000 audits so that
they can be good for all the suppliers and the people who are connected to the company.
Competitive Rivalry
IKEA is the leading company in the share market but that is not the competition but there
are a lot of other companies which are coming up in the market, and they all are going to be a

stuff competition for the company (Matt, Hess and Benlian, 2015). There are small scale
industries which are coming up like supermarket and retailer stores in this competition, but they
will take a lot of time to reach where IKEA is right now and the company will not be able to do
anything that time if they do not try the new methods to promote the brand. The company will
have to come online so that they can make an advantage in the competition and the company will
get more customers. The price strategy the company is using is good but the company can do
much better if they try new methods if they want to create a good brand image and change the
opinion of the press for them. They have a limited customer right now, and they can change that
factor if they are ready to change.
LO 4
P4 INTERPRETING STRATEGIC DIRECTION
Vision The vision which is being seen by IKEA is that the company wants to make a
better lifestyle for the customers and make it comfortable.
Mission The mission of IKEA is to make more designs which are appropriated by the
customers and develop the products so that they can meet the wants and
needs of the customers.
Objectives The objective of the company is to make the customers get the best from the
company at a low price and the quality of the products will also be increased
so that the customers can have easier problems with the company. The
company will be focusing on the furniture of home decors so that the
company can gain a competitive advantage.
Strategies and
porters generic
Strategies
Feasibility Strategy
The company can easily develop the online market in the company because
the company has a stable financial capability and infrastructure.
Suitability Strategy
IKEA must get online so that the company can provide the customers with a
larger market and variety of products and the company will be able to have
higher sales because they will be able to capture a larger customer base

(Linder and Williander, 2017).
Acceptability Strategy
The company will be able to accept this fact and the customers because they
will be providing a larger area and the expectation will be better fulfilled by
it.
Porters Generic
IKEA has reputation between the customers who are loyal to the company
and other the years this company has got experience how to target the
customers in the market. The competitive advantage of the company can be
better understood by Michael Porter's generic model.
There are three stages in this generic strategy which are cost leadership,
differentiation and focus strategy. The following are the explanation for the
company such as.
Cost leadership
IKEA is an expert with this strategy because this strategy deals with having a
competitive advantage over the competitors by lowering the cost of the
products the company's are having. The company's focus is on the middle and
lower class so that the company can sell there products better because they
are selling their products at a very low price so that these classes which are
mentioned above can get the products which are required by them.
To have a competitive advantage the company will have to lower the prices
of the products they are selling to the customers so that the company can
make the most from that process. The company is also providing discounts
and offers on the products so that the company can add up to the competition
in the market and the company is doing very well because of this factor.
Differentiation
Another way to have a competitive advantage in the market is by creating a
differentiation in the products. The company is using this method so that they
can achieve their objectives and goals in the market and make the profit from
it. The company is using unique methods to achieve its objectives and that is
a great advantage for the company (Olson and et.al., 2018). The offers which

are put forward by IKEA are so good that it always puts the company stand
above in the market which is very important for the company even though
they are not online.
Focus Strategy
IKEA has a narrow market segment but the company is paying attention on
the resources therefore the company is doing so good. The company is
focusing on achieve satisfaction and meeting up with the expectations of the
customers.
Tactics There are 7 p's in market mix which are price, place, promotions, people,
process, product and physical evidence. The company is very much focusing
on all the aspects of the market mix but the only problem is that they are not
focusing on promotions and making themselves improve the quality of the
products they are selling. The company has expanded itself in 41 countries
and is still expanding itself slowly. IKEA promotions are not changed, and
they are still using the old method of promotion which is not letting the
company get new customers in the market. IKEA company is using the trends
and needs of the customers therefore they have so many varieties of the
products they are selling. The price of the products the company is selling are
very affordable by the people of the world.
Implementation The company is taking adequate measures so that they are using the resources
which are coming in the company properly and the company will be able to
run for a long time. There has to be a control of the use of the resources
because they are limited and the company is not being able to make the most.
Evaluation Evaluation of the company can be done by see the objectives they have
achieved in the past (Thompson, Strickland and Gamble, 2015). The
company had started by making objectives they had to achieve and the
company is doing very well in the market because of the strategies they use.
Evaluation can be done by making the comparison of where the company
was and where it has reached today.

CONCLUSION
IKEA is the leading company in furniture though the company is into local food products, the
company is doing very well but the drawbacks of the company can be overcome by using
different strategies. IKEA is using the perfect strategy of price so that they can make a place for
them in the market, The price of the products is so low that the customers can easily afford them.
The quality of the products is slowly reducing because of the price getting so low and that is
turning out to be a loss for the company. The promotion technique of the company is also not
good because is it of the old time and the company must get online so that they can capture a
larger customer base. The company has a lot of experience because of the years they have been
in this market and the company can do even better if they are ready to get in new changes in the
company. IKEA has to take some new measures and change their model such as to avoid using
paper catalogs and use advanced technology so that they can attract more customers and put
focus on improving their quality as they are getting criticized a lot for it and there have been real
issues so that they of death and injuries because of the tipping over of furniture. If the company
does not address these concerns they will face a large amount of lawsuits and may not be
allowed to serve in the country.

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