IKEA: Principles of Marketing Analysis

This report analyzes the internal and external factors of IKEA using PESTLE, Porter's Five Forces, Competitor Analysis, and SWOT Analysis.

Principles of Marketing
Name of the brand: IKEA
PREPARED BY:
PREPARED FOR:
DATE:
Table of Contents

Principles of Marketing
Introduction...............................................................................................................1
Macro environmental factor......................................................................................1
PESTLE ANALYSIS.............................................................................................1
Micro environmental factor.......................................................................................2
Porter five force model of IKEA............................................................................2
Competitor analysis...................................................................................................3
SWOT ANALYSIS...................................................................................................4
References.................................................................................................................6
1

Principles of Marketing
Introduction
In this paper the discussion will be made on the topic IKEA. The purpose of the report is
to analyze the internal and external factors or macro and micro factors in context to IKEA. In the
first phase of the report, the macro environmental factors will be considered in which focus will
be given on PESTLE factors. In the next phase of the report the discussion will be made on the
micro environmental factors that will directly impact the operation of the company. The micro
factors will be related to PORTER FIVE FORCES. In the next phase the focus will be given on
the competitor’s analysis in which the discussion will be made on the competitors prevailing in
the market.
In the last phase of the report, the emphasis will be given on the SWOT Analysis that
will help to identify strength, weakness, opportunities and threats.
Macro environmental factor
PESTLE ANALYSIS
Political factor
It has been investigated that there are more than 41 countries in which the company
operates. In the last past years it has been seen that in the Australian market it is important to
reduce the political barriers in context to foreign brands which now have enhanced the presence
of the international brands in the markets. IKEA is also focusing on dominating the Asian
markets. The red tape is always considered as the major worry for the foreign brands available in
the market. Due to political instability the supply chain of the company is also affected which is
located in Australia (Beske, Land & Seuring, 2014).
Economical
There are many brands in the market which are in bad condition at the time of recession.
It has been seen that recession declined the entire purchasing power of the people. In the present
scenario, it has also been seen that economic situation is getting better and also the employment
rate is improving which has directly affect the sale of the company with the higher profits.
Social factor
2

Principles of Marketing
It has been examined that company came under fire for photo shopping women out of its
catalogue in Australia. The company also focuses on improving the values. At the time of
printing the catalogue the company ensured that think should be showed in a right manner.
Technological
The company is taking into consideration the use of latest technology so that better
services can be offered. Through digital marketing the company is focusing on offering effective
customer service.
Environmental
The company has focused towards considering sustainability. The company has also
focused on the climate and planned to invest approximately 1 billion in the renewable energy.
Also company emphasized on investing into the solar panels (Cosmo & Yang, 2017).
Legal
It has been seen that company faced many issues of tipping over and death in the past.
Also to penetrate in the market is a difficult task for IKEA. The reason is related with the
government who wants foreign brands to be followed. It is necessary for the IKEA to produce
30% of its inventory in Australia.
Micro environmental factor
Porter five force model of IKEA
Threat of direct substitute
It is low as thee are not many products that can satisfy the demand of the furniture and
home appliances. There are less threats of substitution in the market in context to IKEA
Company.
Rivalry among the existing firms
3

Principles of Marketing
It is intense as there are many supermarkets like Walmart and Tesco who are selling same
types of products in the market. Also there are many local producers that can be threat for the
company.
Threat of new entrants
It has been seen that to enter into the business there are less legal requirement. The threat
to new entrant is moderate and also there are many brands on the small platform that are entering
into the market. So, the new market entry can help in context to economy of scale. Also the
access of distribution channel can be considered as the barrier for the company. The barrier to
entry is also low but there are many firms who are small and can become the well-known brand
in the market.
Bargaining power of suppliers
It is low as the numbers of suppliers are large and their small size with less financial
capability does not allow them to fight in the competition. The company has the chance to switch
from one supplier to another but if supplier loses the Ikea then it can be difficult situation for
them. The company also launched code of conduct for its suppliers named as IWAY.
Bargaining power of buyers
The bargaining power is high in Ikea as there are many companies who are focusing on
attracting and retaining the customers. The strategy which is considered by the company is
related with marketing and promotion so that customers can be attracted to the company. It has
also focused on digital marketing by considering the pricing strategy so that customer experience
can be enhanced (Frynas & Mellahi, 2015).
Competitor analysis
The competitors of the company are Wal Mart and Amazon. It has been seen that the
products which are offered by these are companies are same as IKEA Australia. Also these
companies focus on grabbing the market share which can affect the goodwill of the company.
Through these competitors the company faces a huge threat which can impact thee overall profits
4

Principles of Marketing
of the company. In the Australian it has been seen that level of competition is high which should
be reduced by considering the effective strategies related to price.
SWOT ANALYSIS
Strength
The company is considered as the largest retail company which has more than 340 stores
in 28 markets. It has been seen that strength possessed by the company is related with good
market image and also with large market share. The recent leadership style offers substantial
benefits in context to economies of scale and also it create a substantial entry for the new
competitors. The company also delivers attractive design products in the fewer prices which
attracts more customers towards the products (UA little Rock, 2017).
Weakness
In the recent year it has been investigated that only 9 percent of the global sale was
generated in Australian region. There are also many environmental concerns in the activities of
the company and also the challenge faced by the company in relation to communication and
environmental policies (Fröding & Lawrence, 2017).
Opportunities
The company has an opportunity in context to green model business that should be
considered to attract more customers towards the products. Also the biggest leadership is related
with the cost leadership of the company. In this, it has been seen that emphasize is given on cost
at the expense of everything, next opportunity is related with the market expansion. The
company should focus on market expansion so that profits can be earned easily at it will also
induce the customers the purchase the products of the company.
Threats
The company low cost business model has also considered by the competitors which
clearly states that the requirement of the company can be innovative from the competitors. The
company has to consider new strategies so that it can be simple to attain large market share and
also positive impact can be given on the overall market share.
5

Principles of Marketing
Also it has been seen that with the use of online shopping, DIY is the strategic success
driver which is now no longer the USP of IKEA. So, physical presence of the competitors is
enhancing which is a threat for the company (Pratap, 2016).
6

Principles of Marketing
References
Beske, P., Land, A., & Seuring, S. (2014). Sustainable supply chain management practices and
dynamic capabilities in the food industry: A critical analysis of the literature. International
Journal of Production Economics, 152, 131-143.
Cosmo, D. E., & Yang, K. (2017). A Further Strategic Move to Sustainability-A Case Study on
IKEA. Journal of Strategic Innovation and Sustainability, 12(2), 39-47.
Fröding, K., & Lawrence, G. (2017). Sustainability at IKEA. Linnaeus Eco-Tech, 67-77.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press,
USA.
Pratap.A. (2016). IKEA SWOT Analysis. Viewed on 6th September, 2018. <
https://www.cheshnotes.com/2016/09/ikea-swot-analysis-2016/>.
UA little Rock.(2017). Strength, weakness, opportunities and threats. Viewed on 6th September,
2018. http://ualr.edu/about/home/strategicplan/chancellor/planning-environment/7-
strengths-weaknesses-opportunities-threats /
7