SWOT, PESTEL and Porter 5 Forces Analysis of IKEA

This report provides an analysis of IKEA using SWOT, PESTEL and Porter 5 Forces models. It covers the strengths, weaknesses, opportunities, and threats of the company along with the impact of external business environment and competitive environment.

Project

Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
SWOT analysis............................................................................................................................3
PESTEL analysis.........................................................................................................................3
Porter 5 Forces............................................................................................................................4
Conclusion.......................................................................................................................................5
REFERNCES:..................................................................................................................................6
Books and Journals:....................................................................................................................6
Online...............................................................................................................................................6

Introduction
It is essential to apply the business models to analyse the effectiveness of a company. To
analyse strength and weakness SWOT model is used, to analyse the impact of external business
environment PESTEL analysis if used and to analyse competitive environment Porter 5 forces is
used. IKEA is an furniture retailer in UK which provide their high quality of furniture to their
customers. The following file covers SWOT, PESTEL and Porter 5 Forces model for IKEA
company.
Main Body
SWOT analysis
Strength-
 IKEA stores are available at both
urban as well as rural areas which
help them to capture more market
shares.
Weakness-
 Lack of expert advice to expand
their business will impact negatively
upon their operations.
Opportunities-
 Expanding market by using joint
venture option where they merge
with another company is effective
for them.
Threats-
 Their competitors have better brand
recognition in the market which
impact negatively upon them.
PESTEL analysis
Political factor- In context of UK, there is no trading restriction for the company based
in UK. Hence, this is beneficial for IKEA company to import raw material from other country
and export their manufactured furniture to capture larger market.
Economical factor- UK is the country which is having good GDP growth rate,
appropriate condition of infrastructure and many others (Tsangas and et. al., 2019). The cost of
raw material in UK is expensive as compared to other countries which impact upon IKEA to
spend more amount on purchasing raw material.

Social factor- UK population is changing their shopping habit and transferring from
traditional shopping to online shopping. IKEA is currently focusing to provide their products and
services to their customers through online to gain customer satisfaction.
Technological factor- IKEA uses advanced technology in their organisation like virtual
reality, augmented reality and etc. to help the customers to decide the design of furniture before
purchasing.
Environmental factor- UK is having large forest area and have different variety of
plants and trees which help IKEA to use woods of different varieties to manufacture their
furnitures. It is also suggested them to plant more trees as their CSR activity.
Legal factor- There is no requirement of licensing for the retailer of furniture in UK.
This will help them to work flexibly.
Porter 5 Forces
Threat of new entrance- In context of UK, new entered company can not impact upon
IKEA company if they have well established brand image and produce good quality of furniture.
Threat of substitute goods- Furniture manufacturing industry are having high risk of
substitute goods where other companies copy the designs of furniture and style of manufacturing
them (Aboutorab, Aslani and Nazari, 2018). IKEA can mention the quality difference of their
company with their competitors to aware customers.
Bargaining power of customers- The quality of furniture is liked by their customers.
Their customers participate in distribution process where they reach to shops and decide their
designs of furniture and pick up their order and assemble them at their home.
Bargaining power of suppliers- To control the threat of supliers IKEA is supposed to
maintaij good relations with their suppliers by providing them discounts and offers on their
purchase from same company.
Competitive rivalry- There is high competition of furniture manufacturing companies in
UK (Qiu, Cano-Kollmann and Mudambi, 2017). It is essential for the IKEA company to have
good quality of their furniture with low prices as compared to their competitors to gain
competitive advantage and lead the market.

Conclusion
It is concluded that effective distribution network of company help them to gain benefit
to attract more customers. Expanding market with joint venture is a good opportunities for
companies to understand the market well with the support of their partner company. Analysing
external factor with the help of PESTEL analysis will help the company to determine all those
benefits and drawbacks of companies which are uncontrollable so that they will formulate their
strategies to reduce the impacts. Porter 5 forces model is used to analyse availability of
competition in market.

REFERNCES:
Books and Journals:
Aboutorab, H., Aslani, A. and Nazari, M., 2018. Analysis of Dynamics Competitiveness by
Using Strategic Groups Maps: Case of Furniture Industry. International Journal of
Business Analytics (IJBAN), 5(3), pp.52-66.
Qiu, X., Cano-Kollmann, M. and Mudambi, R., 2017. Competitiveness and connectivity in
design innovation: a study of Norwegian furniture industry. Competitiveness Review:
An International Business Journal.
Tsangas, M. and et. al., 2019. The application of analytical hierarchy process in combination with
PESTEL-SWOT analysis to assess the hydrocarbons sector in Cyprus. Energies, 12(5),
p.791.
Online
IKEA PESTEL Analysis (2021). [Online] Available through:
<https://www.edrawmax.com/article/ikea-pestel-analysis.html>