Final Project: Business Policy and Strategy Analysis of IKEA

This project provides a detailed analysis of IKEA's business policy and strategy. It begins with a background of IKEA, its mission, vision, and strategic approach, emphasizing its cost leadership business model. The analysis identifies IKEA's strategic group and conducts a thorough industry analysis, including the bargaining power of suppliers and buyers, the threat of substitutes and new entrants, and the level of rivalry. A Strategic Factors Analysis Summary (SFAS) matrix is presented, evaluating internal and external factors. The project then utilizes a TOWS matrix to identify alternative strategies, followed by a stakeholder analysis of a chosen strategy, exploring its potential impact on various stakeholders. The project concludes by suggesting strategies that can help IKEA to grow its business and profit. The analysis is supported by references to academic literature.

Business Policy and Strategy-
IKEA

IKEA is one of the known retailers that deals in
home furnishing products on international level. It
sells furniture, home accessories, and bathroom
and kitchen accessories. It is known for providing
high quality furniture in very low prices that can
help middle class people in buying product of their
choices without paying a higher amount.
Background of IKEA

It was founded by Ingvar Kamprad in 1943. It was
started in Sweden but now it has big retail outlets all
over the world.

 Mission- Mission of IKEA is to provide best quality
home furnishing products at very low prices so
that maximum people that afford it.
 Vision- Vision of IKEA is to create a better life for
people every day.
Vision, Mission and
Strategy

 Strategy- Strategy of the company is to save money from the
buyer’s perspective as well as from the seller’s perspective
without compromising the quality of the products.

IKEA is using a Generic business model that basically
focuses on Cost leadership. It means becoming a low
cost organization in a particular area of products. It
always focuses on improving its production technology
and getting inventory in low cost. It gets product from
the suppliers located in different countries (Fröding,
and Lawrence).
IKEA’s Business Model

IKEA has not a specific strategy group as it does not
only involve in retailing business, it is a manufacturer
as well. But still there are competitors and rivals that
are giving a high competition to the organization. IKEA
has to focus on protecting its niche and focus on the
brand image of the organization to make it more
strong. There are some rivals that are giving a good
competition to the organization like Walmart, Amazon
and Living Spaces.
Strategic Group

Walmart and Amazon are very famous names that
are known by almost everyone. Amazon is involved
in E- commerce and today everyone has started
doing online shopping so it basically provides
convenience to customers.

 Bargaining power of suppliers- IKEA’s bargaining
power of supplier is low as it can easily switch
from one distributor to the other but it can
create a huge loss to the previous distributor.
There are some set of rules and code of conduct
that all the suppliers of IKEA have to follow. This
code of conduct is known as IWAY. There are
some checks and audits done by IKEA on regular
basis regarding any violations.
Industry Analysis

 Bargaining power of Buyer- Every individual has a
different bargaining power but in the case of
IKEA, they have some specifications in their
product that help them in retaining the
customers. Customer base of the organization
has grown a lot and IKEA is focusing on digital
marketing and E- commerce. Bargaining power of
the customers in this case is moderate.

 Threat of Substitutes- There is a very low threat
of substitutes for IKEA. Brand image of the
company is so good in market and their quality
services and affordable products keep attracting
customers. They have a wide range of products
so customer gets everything under one roof
(Saraswati).

 Threat of New Entrants-There is a very low to
moderate threat of new entrants in the market.
There can be competitors who can enter into the
market but they cannot take the position of IKEA.
There are certain retailers that are into the same
business line. There are a very few barriers that
can stop the competitors entering into the
market but there are barriers that can stop their
growth.

 Threat of Rivalry- There is a high level of
competition in the market. There are some major
competitors in the market but IKEA’s competitive
strategy can easily face this competition. It
provides products in affordable prices so it helps
to maintain a large customer base.

Strategic Factors Weight Rating Weight of
Score
S1 IKEA has a very strong
brand image in the market
and it is considered as a core
competency of the
organization.
.08 4 .32
S2 It has a competitive
advantage as it is one of the
leading retailers of furniture
and home furnishing.
.07 3 .21
S3 IKEA sells differentiated
products and this is the main
strategy of the organization.
.06 3 .18
Strategic Factors Analysis Summary
(SFAS) matrix-Internal Factors

S4 It provides very low cost furniture
that is a competitive advantage of
the organization.
.05 4 .2
S5 IKEA has its own industrial group. .04 4 .16
W1 Management issues of the
organization are related to the size of
the organization.
.04 4 .16
W2 IKEA operates in different
countries and due to the same there
are cultural issues and it is difficult to
understand the taste and preference
of people.
.05 3.5 .175
W3 It does not have a strong retail
strategy due to limited distribution
channels.
.06 3 .18

O1 IKEA can focus on a broader market
segment by providing differentiated
product.
.05 4 .2
O2 It provides environment friendly
products that can contribute in the
growth of the organization.
.04 3.5 .14
O3 It is involved into online marketing.
It can be a good opportunity for the
growth.
.07 4 .28
O4 It can easily sustain in the long run. .06 2 .12
O5 It can customize its design and
attract more customers.
.05 4 .2
External Factors

T1 There is a threat of new
entrants for IKEA as there is a
strong competition.
.07 4 .28
T2 There is a global environment
that keeps on changing.
.06 4 .24
T3 IKEA should monitor the
environment in a very careful
manner as there are multiple
environmental issues.
.05 3.5 .175
T4 There is different retailers in
the market who are providing the
similar products.
.05 3.5 .175
T5 IKEA can expand its operations
wider.
.05 3.5 .175
Total 1.0 3.57

SO- IKEA is known for its quality products in low
prices so it can customize its home furnishing
products and can increase the sales (Kim, and Kim).
WO- IKEA has not been covered the whole global
market. It still needs to open its retail outlets on
various locations. This can really make IKEA more
popular and profitable.
Alternative strategies using
the TOWS Matrix

ST- Global Economic Crisis is a threat to the IKEA
and it can be a strength for the organization
because it provides affordable products in the
market (Johnson).
WT- Advertising is not helping the organization a lot
as the target market is full of young people so it can
be considered as a threat to the organization
(Thomsen).

WO strategy can be really helpful for IKEA as well
as its stakeholders. IKEA can open its stores across
the globe and especially at the high population
areas (Schirone, and Torkan). It can help in
increasing the number of customers and a good
profit to stakeholders. IKEA can easily attract the
customers because of its high quality product in
low prices. It can help the distributors to grow in
an effective way.
Alternative strategies and the possible
effect of that strategy on various
stakeholders

 By opening new retail stores in countries like
India, IKEA can attract more customers as
population of the same is very high. It will also
help distributors to enlarge their supply chain
and grow well in the global market. It can be
easily executed by doing a proper market
research and advertisement before the launch of
the brand.

 Fröding, Karin, and Geoff Lawrence. "Sustainability At
IKEA". Linnaeus Eco-Tech, 2017, p. 67. Linnaeus University,
doi:10.15626/eco-tech.2010.008.
 Johnson, Gerry. Exploring Corporate Strategy. Pearson,
2014.
 Kim, So-Hyung, and Joo-Tae Kim. "Overseas Strategy Of
Global Furniture Retailer : The Case Of ‘IKEA
Korea’". INTERNATIONAL BUSINESS REVIEW, vol 20, no. 1,
2016, p. 199. Korean Academy Of International Business
Management, doi:10.21739/ibr.2016.03.20.1.199.
References

 Saraswati, Trisha Gilang. "Driving Factors Of Consumer
To Purchase Furniture Online On IKEA Indonesia
Website". Journal Of Secretary And Business
Administration, vol 2, no. 1, 2018, p. 19. Akademi
Sekretari Dan Manajemen Taruna Bakti,
doi:10.31104/jsab.v2i1.26.
 Schirone, Dario A., and Germano Torkan. "Food In IKEA:
A Strategy To Support The Core Business". Business And
Management Research, vol 1, no. 4, 2012. Sciedu Press,
doi:10.5430/bmr.v1n4p81.

 Thomsen, Steen. "Foundation Ownership At IKEA". SSRN
Electronic Journal, 2018. Elsevier BV,
doi:10.2139/ssrn.3243347.