Challenges Faced by IKEA: Analysis and Recommendations

This report analyzes the challenges faced by IKEA and provides recommendations for the company. The report covers different models like SWOT analysis, Porter’s five forces, and PESTLE analysis to conduct research related to the challenges faced by the company.

Individual Report on
challenge

Table of Contents
INTRODUCTION...........................................................................................................................3
The Company...................................................................................................................................3
Profile.....................................................................................................................................3
Management approaches........................................................................................................7
The business challenge....................................................................................................................7
Description and impact of challenge on company.................................................................7
RECOMMENDATIONS.................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Competing value framework is considered as an effective tool for applying the culture of
organisation and its dynamics to perform several functions in an appropriate manner (Jiang, Jia
and Gong, 2018). For this report, the chosen company is IKEA as it is a multinational
Conglomerate that put emphasis on the different marketing and types of products and services
like furniture, kitchen appliances and so on to satisfy the concerning user. Respective company
was founded in 1943 by Ingvar Kamprad. The report leads to cover details regarding the
description of several challenges which are faced by company to impose the direct impact of
company. There are different types of models like Porter’s five forces, PESTLE analysis and
SWOT to conduct the research which is related to the challenges which are faced by the
company in an effective manner. There is the discussion related to the management approach
from CVF and recommendations are also provided to the particular company.
The Company
Profile
IKEA is considered as the international Conglomerate the put emphasis on the marketing
different types of commodities like Kitchen appliances, furniture and so on for satisfying its user.
The company established in 1943 by Ingvar Kamprad.
 The vision of IKEA is to accomplish leading position across the world.
 The mission of IKEA is to offer the creative and different quality of products and
services to their potential customers.
 The objective of IKEA is to enhance the overall sales by 20% in upcoming 4 months.
SWOT Analysis
STRENGTHS WEAKNESSES
 Because of having effective and wide
variety of products across the world
tends to attract large number of
customers towards the company in
terms of enhancing their sales and
revenues (Dencher, 2021).
 It is analysed as the prominent strength
 They tend to operate within the several
countries as there is the corruption
because of the expansion of businesses
in Russia which is the main weakness
for an organisation.
 Environmental issues IKEA need
putting in check related to their

to the concerning product which is
being determined as the valuable and
cost effective for company.
stakeholders as there are different types
of environmental issues that occur and
put negative goodwill and brand image
of an organisation among the customers
in market area.
OPPORTUNITIES THREATS
 The company focuses on the opening of
their retail outlets in China as it leads to
attract the large number of customers
which are determined as the main
opportunity for the company.
 Additionally, they also tend to execute
the new technology to provide creative
and different products to their potential
customers over the significant period of
time.
 Because of the frequent changes in the
rules and regulations, IKEA does not
come up with the prominent changes
which is being determined as the threat
for the company (Per Slanac, 2020).
 There are several competitors of IKEA
who become barrier in the upcoming
future of company.
PESTLE Analysis
The PESTLE analysis is considered by respective company to understand the risk factors,
challenges and current controversies growth which are discussed as:
 Political: IKEA put emphasis on opening the outlet in around 41 countries as the
company is abided by the concerning norms and regulations. Hence, the political stability
is beneficial for IKEA to organise their activities in an effective manner. Besides from
this, because of having the friendly government, it is essential for IKEA to put emphasis
on the relationship in terms of keeping things stable as the income factor is quite risky
(Khan and Shafiq, 2021). Hence, it put negative impact over the growth of company.
 Economic: This factor undertakes the purchasing power, inflation and so on which put
direct impact over the operations and functions of IKEA. Because of the economic
slowdown there are several issues which are being faced by the company to recruit the
employees from Britain that put negative impact over the functioning of organisation. In
regard of this, there is an opportunity from the developing nations where they focus on

expanding their organisation in an effective manner and also increase sales. Hence, they
open the store in 2018 and the aim of opening around 25 outlets in India till the year 2025
that put positive impact over the economic conditions of company.
 Social: This factor put direct impact over the operations and functioning of company. It
is important for IKEA to follow their culture in terms of satisfying the need and during
the specific time period, it also tends to put positive impact over the operations and
running of company (Burt and et. al., 2021). Besides from this, because of the frequent
changes in the needs of customers, it is not much easy to offer them products as per their
wants.
 Technological: IKEA focus over updating their overall technology to cope up with the
changing environment of an organisation as they tend to put emphasis on organising the
proper research to bring more technology in terms of satisfying their customers. Further,
the organisation also put emphasis over the execution of advanced technology to satisfy
their potential customers. Because of the effective execution of advanced technology to
implement the cost for company put negative impact over the organisation.
 Legal: It is essential for company to follow the concerning rules and regulations to
organise their operations in an effective manner as it put positive impact over the
company (Celik, 2021). It occurs because of the frequent changes in the laws which is
difficult for the company to follow which put negative impact on an organisation.
 Environmental: It put direct impact over the organisation like because of the improved
awareness of individuals regarding their changes that occur in climate. It is also analysed
as the responsibility for an organisation to provide concerning products which are
sustainable in nature. Hence, the company provide products as per the sustainability that
put positive impact over the company. Additionally, there is also the biggest challenge
for IKEA to possess 400 plus stores in more than 40 nations but the company focus on
achieving their target by 2030 which is being determined as the major challenges for
company.
Therefore, the above analysis is opted by IKEA to analyse the concerning risk factors,
controversies and the challenges that put major impact from the external side in terms of both
positive and negative.
Porter’s Five Forces

Porter’s five forces model is used to analyse the competition within the business
environment and it is also opted by IKEA which is mentioned as underneath:
 Threat of new entrants: The force of new entrants is low due to the new market as it is
not capable to take the benefits from the economies of scale to that extent in which IKEA
operates (Åberg, 2019). Hence, it is complicated for the new entrants to organise their
business operations like IKEA. Therefore, they tend to provide the superior quality of
products and services to their users and the new entrants need more funds to operate their
business at the particular level.
 Competitive rivalry: There are number of competitors in the market like Walmart, ALDI
and so on. Hence, it is essential for company to provide different and unique quality of
products and services for enhancing their sales in the upcoming future otherwise it leads
to decrease the sales of company.
 Bargaining power of buyers: Here, the customers has wider choice to purchase their
products and services from their customers during the specific period of time. hence, it is
important for IKEA to provide the commodities as per their preferences and needs to
enhance the sales of IKEA otherwise it not profitable for the company.
 Bargaining power of suppliers: It has been analysed that there are different types of
suppliers who tends to provide same types of products to their customers (Nóbrega,
2021). For this, there are number of competitors of IKEA who provide same kind of
products. Hence, it is important for them to provide product as per their needs and
preferences.
 Threat of substitute products: There are several competitors which are present in the
market and provide same products and services which are being offered by IKEA. For
this, IKEA need to focus on providing the potential products and services as per their
requirements that helps in improving the profit margin in the upcoming period of time
(Tran, 2021). Therefore, the company tends to put emphasis on providing superior quality
of products and services to their customers which is useful in achieving competitive
advantage over the rivals in the market area. Thus, it is also useful in enhancing the profit
margin and sales of an organisation in the upcoming period of time.

Management approaches
There are different management approaches which are being used from CVF. For this, the
human relation theory is related to the management approaches which is discussed as
underneath:
The human relation theory depicts the significant method by which the manager tends to
interact with their subordinates in an effective manner. For this, the management team focuses
over maintaining the effective human relations then it leads to enhance the satisfaction level of
workers which leads to improve the level of productivity in the future period of time. hence, the
human relation theory is useful for organising the different activities in an effective manner. The
overall objective of human relation is to appreciate the human capital by providing them
incentives, training session, motivating them and so on (Goel and Garg, 2018). They also tend to
provide food, shelter and so on to the individual person and also offer them safety. To provide
them effective and acceptable leadership is the basic objective for IKEA to use their concerning
theory. Besides from this, they also satisfy their belongingness requirements to interact with their
customers in an effective manner. They also put emphasis on fulfilling their self-esteem and self-
actualisation requirements to organise their business operations in an effective manner.
The business challenge
Description and impact of challenge on company
There are several challenges which are faced by IKEA that put major impact over the
operations of business.
 Return on investment of IKEA tends to enhance their spending by approximately 1.5
billion in India but it has been analysed as the major challenge for company to earn
profitability for the investment that is helpful in terms of enhancing their profit margin in
the upcoming period of time (Jiang, Jia and Gong, 2018).
 Another challenge is related with higher tax which is being determined as the main
challenge for IKEA. Thus, it leads to put emphasis on coping up the challenges to
organise their business operations in an effective manner. Because of the increment in tax
rates, it put direct impact on the company during the specific period of time.
 There are several strategic challenges which are faced by IKEA to organise their business
activities and functions in an effective manner. They also tend to put emphasis on taking

feedback and overall reviews from the client and also designing the preferences from the
market are which is helpful in terms of taking decision during the specific period of time
(Dencher, 2021). They also put emphasis on motivating the supplier instead of varying
their customers and the overall expectations from nations wise.
Therefore, the management team of IKEA put emphasis on overcoming the challenges in terms
of organising their business functions in an effective manner.
RECOMMENDATIONS
There are several recommendations which are given to company regarding their growth and
development are discussed as:
 The company tends to put emphasis opening their retail outlets in India and China as due
to this they are able to attract large number of customers which are determined as the
main opportunity for an organisation.
 Along with this, they also execute the developed technology in terms of offering the
different and unique products to their potential customers during the given period of time.
 IKEA need to put emphasis on offering effective training to their employees as it helps
them in providing proper services to their customers during the particular period of time.
CONCLUSION
From the preceding discussion, it has been analysed that the competing value framework is
analysed as an effective tool to identify the culture of organisation and its dynamics to perform
the several functions in desired manner. The report leads to include the description related to the
different challenges which are being faced by the company the put direct impact over the
functioning and operations of company. There are several types of model like SWOT analysis,
porter’s five forces and PESTLE analysis for organising research which is being concerned to the
challenges and also faced by company in an effective manner. There is discussion regarding the
management approach from CVF and recommendations are also given which are being opted by
company.

REFERENCES
Books and Journals
Åberg, E., 2019. EVALUATION OF IKEA AS A SUSTAINABLE FORESTRY ACTOR IN
THE CONTEXT OF INDIA.
Burt, S and et. al., 2021. The changing marketing orientation within the business model of an
international retailer–IKEA in China over 10 years. The International Review of Retail,
Distribution and Consumer Research, 31(2), pp.229-255.
Celik, B., 2021. Improving Motivational Factors of Ikea Espoo Logistics Employees During
COVID-19.
Dencher, E., 2021. Designing New Concepts for IKEA’s Omni-Channel Co-Worker Experience.
Goel, R. and Garg, S., 2018. India as a Marketplace: A Case Study of IKEA. Available at SSRN
3282924.
Jiang, Y., Jia, F. and Gong, Y., 2018. IKEA: global sourcing and the sustainable leather
initiative. International Food and Agribusiness Management Review, pp.627-639.
Khan, A. and Shafiq, A.A., 2021. Internationalization Challenges for Retail Firms in Emerging
Asian Markets: A case study of IKEA.
Nóbrega, M.M.D., 2021. Private equity challenge-maison du monde: homeware collections´
equity growth path (Doctoral dissertation).
Per Slanac, M., 2020. Zelena ekonomija kao bitan element suvremenog poslovanja na primjeru
Ikea grupe (Doctoral dissertation, University of Rijeka. Faculty of Economics and
Business).
Tran, D., 2021. Green Outbound Logistics in E-commerce: Opportunities and Challenges. A
Case Study on IKEA Finland and Zalando.