Case Study: IKEA's SWOT Analysis and Business Growth

This case study explores IKEA's SWOT analysis, including its strengths, weaknesses, opportunities, and threats. It discusses how IKEA managed to minimize threats and grow their business through various strategies. Additionally, it provides a SWOT analysis of Wal-Mart.

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Case study related to IKEA 1
Table of Contents
Introduction –.............................................................................................................................2
Q1...............................................................................................................................................2
SWOT Analysis –..................................................................................................................2
Q2...............................................................................................................................................4
Difference between internal and external factors –................................................................4
Q3...............................................................................................................................................5
IKEA has managed to minimise its treats in the following ways -........................................5
Q4...............................................................................................................................................7
How IKEA grew their business –...........................................................................................7
Q5...............................................................................................................................................8
SWOT Analysis of Wal-Mart –.............................................................................................8
About the company –.........................................................................................................8
SWOT analysis –................................................................................................................8
Conclusion –.............................................................................................................................10
References -..............................................................................................................................11

Case study related to IKEA 2
Introduction –
IKEA is a company related to home furnishings, which is founded by Ingvar Kamprad in
Sweden in 1943. Today it is the world’s largest retailer for home furnishing. Company has
grown continuously since it was founded. Company’s vision is to create a better everyone life
for the many people and their business idea is to designing the furniture at affordable price so
that many people will be able to acquire their products and also to achieve quality of products
through optimizing value chain system, building positive relationship with suppliers,
investing in that production which is highly automated and producing large sale volume
(About the IKEA Group, 2017). Furniture at IKEA is mostly flat- pack, ready to be
assembled by the customers, this allow a reduction in packaging and costs to the company.
Company have 9,500 products which include home furniture and accessories. These products
are available at all stores and customer can also order these products through online website
of the company (IKEA all products, 2019). These stores also include cafes and restaurants
which serve Swedish food. They have 355 stores in more than 29 countries and also have
more than 100,000 employees. Low prices of the products are one of the key strategies of the
company, which help in gaining competitive advantages and it also help to make the
customers to buy their products at affordable price. The company focuses on every lifestyle
of its customers, different age groups and types of households and always focus on the
environment and people, so it will help the company to make better utilization of energy as
well as raw material. So, this will help the company in reducing cost, positive impact on
environment and achieving their goals (History, 2019).
Q1.
SWOT Analysis –
SWOT analysis states as strengths, weakness, opportunities and treats analysis and it is a
framework which is used by the company for analysing and identifying the internal factor as
well as external factors which can have an effect on impact on the viability of a product,
project, place and person. SWOT analysis mainly used by business entities but it can also be
used by non- profit organization and by individuals for their personal assessment. This is a
part of strategic planning of the company and this analysis help the company in decision
making process because it enable the company to uncover success opportunities or knowing
the threats before they become big challenges or issues for a company (Ommani, 2011).

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There are four elements of a SWOT analysis. These are:
1. Strengths – Strengths are those features or positive point of the company which allow
them to grow their business or to operate their business more effectively and
efficiently than their competitors. Strengths of the company add value to its products
and services (Helms, 2010).
IKEA have the following strengths:
 Strong global brand which attract large number of customers
 Same product quality and price worldwide
 They are offering functional and well- designed products at low prices, so that
all type of person can afford that price
 Equal balance between quality, function, design and price.
 Proper utilization of raw material and energy
2. Weakness – Weakness are those features or negative point of the company which
shows the competitive disadvantages. These negative points can stop a company from
performing at its higher or optimum level. Company needs to improve that negative
points.
IKEA have the following weakness:
 Difficult to control quality and standards
 Poor supply chain management, due to this lower level of customer’s
satisfaction
 Difficult to balancing between good quality products and low price
 Lack of communications with their customers and other stakeholders
3. Opportunities – Opportunities refer as favourable external factors which could help a
company in gaining competitive advantages. Favourable external factors such as
opportunities which exist in their environment and market which can be benefit for
their company, what are the customers’ perception towards their business,
opportunities which are created from any recent change or market growth and other
government policies or rules and regulation which can be benefit for the company.
IKEA have the following opportunities:
 Increasing or rapidly growing demand for the greener products
 Increasing demand for their products due to low price of products
 Increasing in the demand for lower carbon footprints and reduced water
usages

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4. Threats – Threats refer to those factors which have the potential to harm a company or
an organization. It includes unfavourable external factors which are beyond to the
control of company and they can place business strategies at risk (Phadermrod,
Crowder and Wills, 2018).
IKEA have the following threats:
 Core market segment for their products and services
 Increase in competition
 Due to recession, consumers spending are decreasing because of their disposal
income is reduced.
Q2.
Difference between internal and external factors –
SWOT analysis is a method of structured planning which is used to evaluate or identified
strengths, weakness, opportunities and threats of any business. This analysis identifies factors
related to both internal or external which are helpful or harmful to the goal or objective of the
organization (Olsen, 2019).
1. Internal Factors – Internal factors include strengths and weakness of the company or
internal factors are those factors within an organization which affect either positively
or negatively to the performance and productivity of the organization. These factors
are within the control of the company. Strengths refer to competencies which give the
company a benefit in achieving the needs of their target market. Company should
analysis its strengths through customer focused and market oriented. Weakness refers
as any disadvantage or limitation which faces by company in achieving their goals
and company should analysis its weakness through customer perspectives (Hove and
Tarisai, 2017).
Following are the internal factors which affect the company:
a. Resources: It includes profitability, sales, and qualities of products, brand
associations, pricing of the products, employee capability, employee satisfactions
and analysis of product portfolio of the company.
b. Capabilities or goal: It includes identifying internal strategic advantages,
strengths, problems, constraints, weakness and uncertainties.

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2. External Factors – External factors are those factors outside an organization which
affect the company’s productivity and performance either positively or negatively.
External factors include opportunities and treats which exist in company’s
environment and these factors outside the control of the company. They are
independent from the company or an organization. Opportunities are the advantages
in the company’s environment and threats are the barriers or disadvantages in the
company’s environment.
Following are the areas which used by the company to analysis external factors:
 Customer analysis: Customer segmentation, motivation, customer satisfaction,
unmet needs of the customers
 Competitive analysis: Identify properly, evaluate the performance of company,
image, competitors objectives, culture, cost structure, strategies, strengths and
weakness
 Market Analysis: It includes size of market, profitability, projected growth of
the company, entry and exist barriers, distribution system, cost structure,
trends and key success factors.
 Environmental Analysis: It includes government, technological, cultural,
economic, scenarios, demographic, information need areas, its goal is to
evaluate external opportunities, trends, threats and strategic uncertainties
(Gupta, 2013).
So, these are the internal or external factors which affect the company’s performance
in both ways either positively or negatively. Company should plan to converts its
internal weakness into strengths and its external treats into opportunities of the
company (Menguc, Auh and Ozanne, 2010).
Q3.
IKEA has managed to minimise its treats in the following ways -
1. Threat: Social trends such as entering of the buyers in the housing market are
slowdown, so this creates core market segment for the products of IKEA.
IKEA has managed this treat in the following ways:
 The company is building online help which guide their customers to live
sustainable life.

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 Company should focus on level of customer satisfaction and their needs
related to the products and services
 Focus on home improvement
 Supports or helps the customers with ideas and tips on IKEA website, so this
will help in reducing negative impact on the environment and it also help their
customers in saving their time
 Providing training to staffs on the basis of sustainability (Wenzel and Forster,
2016)
2. Threat: Increase in competitors
IKEA has managed this threat in the following ways:
 Economies of scale give competitive advantages to the company because
when cost saving then this can be passed on to its customers in the form of
lower prices of their products.
 Company should add unique features in their products, so it will help the
company in gaining competitive advantages
 Better utilization of technology and resources
 Company should employing managers who are specialized in management
 Due to lower price, there will high entry barriers for the smaller companies
who want to enter in such market.
 Programs related to consumer loyalty, so it will help the company in
increasing loyalty of customers and increasing the productivity and
performance of the company as compare to their competitors.
3. Threat: Economic factors affect the company as due to recession, customers spending
are slow down and their disposable income reduces.
IKEA has managed this threat in the following ways:
 Company should keeping their product prices as low as possible, so it will also
help the company in increasing their profits and productivity than their
competitors
 Pricing strategy of the company targets huge number of the customers with
limited financial resources
 Company should develop or make plan of risk management
 Good quality and unique design of their products
 Proper communication channel between company and its customers.

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 Conducting various programs which help the company in increasing
awareness among the customers about its products or services (Pahl and
Richter, 2009).
Q4.
How IKEA grew their business –
In following ways IKEA used information in their SWOT analysis which helps them in
growing their business: -
1. The company improved its performance through SWOT analysis by converting
internal weakness into strengths and external threats into opportunities for the
company. One of the strategies of the company is making strategies to not to use extra
material than required in the production of products and also make plan to increases
the use of waste or recycled materials. The company has following strengths which
helps them in growing their business (Ferrel and Hartline, 2010):
 Increasing use of waste or renewable materials and the company increases
these use from 71 per cent to 75 per cent.
 Proper utilization of resources, energy and raw materials
 Creating long term relationship with its customers as well as suppliers,
negotiated lower price of its products and greater securities for the suppliers
 Huge customer base because customers can buy its products in bulk at cheaper
price
 Proper supply and distribution chain of management, so it will help the
company in reducing its transaction cost
 They are delivering products directly from suppliers to all IKEA stores
 Company use new technologies as OGLA chairs and NORDEN table
2. The opportunities of company help them in growing their business as increasing
demand greener as well as low prices products, sustainable utilization of resources,
reduce use of energy and more utilization of renewable energy, so the company
reduces the use of business flights by 60 per cent, enhancing social responsibility and
building trust and good relationship with stakeholders, customers and suppliers. So,
these above opportunities help the company in increasing their performance and

Case study related to IKEA 8
productivity and also help in growing their business and achieving their goals and
objectives (Berger, 2011).
3. The company minimise its threats and handling both internal and external issues in a
proper manner through strengths and by reducing its weakness. Company is building
online help which support their customers to live sustainable life, focus more on home
improvement, focus on level of satisfaction for both employees as well as the
customers, they help the customers through their website, provide training to their
employees on sustainability, better utilization of resources and technology, proper
strategies for pricing of the products and creating effective communication between
organization and its customers. So, these effects help the company to grow their
business in terms of productivity and performance (Ferrell and Speh, 2017).
Q5.
SWOT Analysis of Wal-Mart –
About the company –
Walmart is an American company which is based on Retail Corporation. The company is not
only retail based but it is also the largest grocery chain in the whole world. The company was
founded by Samuel Walton and J.L. Walton in Rogers in 1962 and it’s headquartered in
Bentonville, Arkansas. Company mission is “save people money so they can live better.
Company has more than 11,300 stores in 27 countries and also has more than 275 million
customers. In 2019, company increases their revenue to $514.4 billion and employs 2.2
million associated in whole world (Walmart Corporate, 2019).
SWOT analysis –
Strengths:
 World’s largest retailer with more
revenue and more stores
 Better economies of scale
 Low price of its products
 Strong brand value and company’s
reputation
 Covered geographical area
 Company have advanced technology
Weakness:
 Poor promotion of their products in
terms of publicity
 High turnover of the employees
 Lack of flexibilities compare to their
competitors
 Poor quality of the some products
 Company are facing difficulty and
challenges in International market

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and information system
 Better decision making
 They have maximise sales and
productivity
 Proper supply chain management as
well as logistics management
 Technology related to their system of
inventory control
 Specialized human resources
 Higher productivity and performance
 Huge customer base (Lichtenstein,
2011)
 Employee dissatisfaction
 Discrimination among the employees
in terms of wages, benefits,
promotion and overtime pay
 Working environment are not
effective
 Lack of motivation and incentives
and benefits
 Lack of social responsibilities
towards their employees
 Customers does not have frill
experience while shopping in this
company because there is no services
related to enjoyment for the
customers and there is no ambiance
 Inferior quality of some of the
products (Kneer, 2009)
Opportunities:
 The company has an opportunity to
offer western goods to the customers
at developed countries
 Economies of scale are growing day
by day of the developed countries
 Company are offering new format for
the new products as grocery to their
customers (Faarup, 2010)
 Their profit margin is higher
 High bargaining power
 Company has the opportunities to
launch and introduce their special
products to the customers related to
the trend which is towards healthier
Threats:
 Increase in competitions and other
retailers such as Amazon, Costco,
Tesco and Carrefour.
 Economic factors also affect the
company as due to recession,
customers spending are low because
there income are also low, so due to
this they does not buy the products
from Walmart
 Social treats are also increasing from
the local communities, they do not
want that small retailer faces
problems because of Walmart
 Increasing labour cost for producing

Case study related to IKEA 10
eating countries
 They covered large geographical area
as they have their stores in all
countries or in all states
 The company has an opportunity to
expand or increase their stores
the products or rendering the services
 Raw material costs are also increases
 Competitive disadvantages (Mennen,
2010)
Conclusion –
Hence, IKEA is world’s largest retailer for home furnishing and company is a well- known
worldwide brand with their stores in whole world and it is grown continuously since it was
founded in 1943. Company can identify their performance and positions in the market
through SWOT (Strengths, Weakness, Opportunity and Threat) analysis. Strengths and
weakness are the internal factors and they can be control by the company and opportunity and
threat are external factors and they cannot be control by the company. Strengths and
opportunity of IKEA are strong brand reputation, offer low price for their products to the
customers, proper utilization of waste and renewable energy, growing demand for their
products which have low prices and greener products, better quality of product which attract
large number of customers and have better economies of scale. Weakness and threats of the
company are competition increases, sales reduce because of recessions and they do not have
balanced between low price and product quality. IKEA has managed to minimise its threat as
building online help on its website to their customers, better use of resources and technology,
provide training to their employees on sustainability, better economies of scale and proper
communication channel between the company and the organization. So, SWOT analysis of
the company helps the company in growing their business as well as achieving their goals
and objectives and it necessary to maintain strong brand image in the market. Walmart is also
world’s largest company and have high revenue and productivity as compare to its
competitors. Company use its strengths to minimise its weakness and use its opportunity to
minimise its threats.

Case study related to IKEA 11
References -
Berger, A. (2011) Operations Management: IKEA. California: GRIN Publishing.
Faarup, P. (2010) The Marketing Framework : International Marketing and Sales. Denmark:
Academica.
Ferrell, O. and Hartline, M. (2010) Marketing Strategy. United State of America: South-
Western Cengage Learning.
Ferrell, O. and Speh, T. (2017) Marketing Strategy, Loose- Leaf Version. Australia: Cengage
Learning.
Gupta, A. (2013) Environment & PEST Analysis: An Approach to External Business
Environment. International Journal of Modern Social Science, 2(1), pp.34-43.
Helms, M. (2010) Exploring SWOT analysis. Journal of Strategy and Management, 3(3),
pp.215-251.
Hove, P. and Tarisai, C. (2017) Internal Factors Affecting the Successful Growth and
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Economics, 4(1), pp.57-67.
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York: The New Press.

Case study related to IKEA 12
Menguc, B., Auh, S. and Ozanne, L. (2010) The Interactive Effect of Internal and External
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