Individual Case Study Analysis Report: IKEA's Business Strategies

This report presents a comprehensive case study analysis of IKEA, a multinational furniture retailer. It begins with an introduction to IKEA, highlighting its origins and global presence. The core of the report involves an in-depth examination of IKEA's external environment using the PESTLE model, analyzing the political, economic, social, technological, legal, and environmental factors impacting its operations across various countries. The report then shifts to an internal environmental analysis, employing the SWOT model to assess IKEA's strengths, weaknesses, opportunities, and threats. The analysis considers factors such as IKEA's clear vision, global reach, cost of raw materials, and competitive pressures. Finally, the report concludes with recommendations, emphasizing the importance of product quality, environmental sustainability, and strategic diversification to maintain IKEA's competitive advantage and adapt to changing market dynamics. The study underscores the need for IKEA to balance affordability with quality, embrace innovation, and effectively manage its global operations in a complex and evolving business landscape.

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Individual case study analysis Report
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Individual case study analysis report of “IKEA”
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Table of Contents
Introduction.................................................................................................................................................4
External environmental analysis of IKEA...................................................................................................5
Internal environmental analysis of IKEA....................................................................................................7
Conclusion and Recommendation...............................................................................................................9
References.................................................................................................................................................10
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Introduction
This report has been written after doing a case study of a multinational company named IKEA.
Also through this case study the company's internal environment and external environment
analysis have been done using PESTLE and SWOT models respectively. And based on this
analysis some recommendation for the smooth functioning of the company at the international
level is also discussed in this report. Because an organization no matter how long its expansion
needs to do some changes with time in its strategies. Otherwise, the company is not able to
satisfy the demand of the customer. And in such a situation selling of companies good is
decreases. Ans thus company may be suffering from huge losses. IKEA is a multinational
Company established in the year of 1943 in Sweden. In Delft, Netherlands its headquarter is
located. this Swedish brand offers household items like furniture, and home decor items in the
affordable range (ikea.com, 2023). And at present, it is one of the most popular and world's
leading furniture retailer companies. The name of the IKEA organization is derived from the
initials of the founder Ingvar Kamprad (IK), the farm Elmteryd(A) where IKEA was first
established, and Agunnareid(A), a village near the site (ikea.com, 2023).
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External environmental analysis of IKEA
Some factors affect the business performance of an organization externally. so that these factors
are accountable as external environmental factors of that organization. Whereas some factors
affect the business performance of an organization internally. so that these factors are
accountable as internal environmental factors of that organization. These internal environmental
factors may be controllable by nature but the external environmental factor is extremely tough
and uncontrollable by nature. But by using the PESTLE model, the organization tries to control
these external factors. This PESTLE model is used to analyze the external environment in which
an organization is working or operates. By using the PESTLE model an Organisation can able to
do many types of research related to the growth of the organization along with products and
services. And according to this appropriate research introducing some creativity in the product or
services apart from making some changes in the strategic plan (Matovic, 2020).
Fig 01: PESTEL Analysis
Source: researchgate.net, 2023.
Political: IKEA is operating its stores in more than 41 countries. And to operate its store in
these countries, the company also has to follow various political-related rules of those countries.
but it is not possible all the time for a company to follow each politically related rule of different
countries. Because of this IKEA's business had to be affected due to political factors in some
countries. For example, IKEA imports and exports its goods to a country that has an unfriendly
government, and IKEA's revenue may be at stake. On the contrary, IKEA imports and exports
its goods to any country which has a friendly government, so IKEA can get positive benefits.
Keeping this in mind, IKEA is trying to establish its business in the markets of the Asian
country.
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Economic: Since the IKEA company does its business internationally, the company is also
affected by the laws of different countries internationally. And one of the major factors is the
extreme sensitivity of the worldwide economy. That is, since the year 2007, some countries are
facing economic recession at the international level. Because of this millions of people lost their
jobs. In such a situation of economic recession, consumers prefer to buy only essential things
instead of buying luxurious items to live their lives. Because of this, a company like IKEA
which sells home furnishings and furniture, etc. had to face a lot of loss. But considering the
financial crunch of the people, the IKEA company made its goods relatively cheaper than before.
At the same time fortunately the world economy is slowly getting stronger. That's why people
have started saving money and buying cheap furnishings for their homes. And slowly IKEA's
revenue is starting to recover. Which is quite a positive outlook for a company.
Social: When any company chooses a country to do business internationally, then that company
needs to know the local culture of that country. And at the same time, it is also necessary to
follow the culture there. Otherwise, the social values of the local consumers may get hurt. In
this situation, the goods of the company can be completely boycotted by the consumers. And the
company may have to face huge losses. For example, if Ikea uses the same catalog to conduct its
business worldwide, that catalog doesn't need to be accepted in each country.
Technological: In this era of technological advancement, Ikea still uses paper catalogs to display
its products. But apart from this, the company also has a working website through which the
company allows people to place online orders for home decor items. This facility could not be
provided by the company to the customer through the paper catalog. Therefore, according to the
convenience of the customer, the company should continue to release various offers, products,
etc. on its website. Along with this, all online payment modes are accepted and the company
should also provide the facility of a return policy and home delivery, etc.
Legal: When any company operates at the international level, it is extremely important to follow
various legal regulations in different areas such as labor laws, laws related to product quality, etc.
In some countries, customers using IKEA products have been injured and even killed due to the
poor quality of the product. Because of this, many companies had to fight many lawsuits. In
such a situation, the company had to face a lot of financial loss. Along with this, the social
reputation of the company also got tarnished. In such a situation, to recover its brand image
from the back, it became extremely necessary for the company to ensure that its product is safe
to use.
Environmental: It is also very important for an IKEA company operating internationally to
follow the various environmental regulations of these countries to do its business. Along with
this, the IKEA company has also invested in various eco-friendly programs to run its business
smoothly in different countries. In the past year, this company has invested over $1 billion in the
capital, especially for renewable energy in various poor countries. Apart from this, the company
has set a target to provide energy supply in its stores using completely renewable energy sources.
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To achieve this goal, the company has recently invested a lot of capital in buying wind and solar
power panels. They also aim to use more and more sustainable natural ingredients like wood and
cotton to make their wares.
Internal environmental analysis of IKEA
Some factors affect the business performance of an organization internally. so that these factors
are considered internal environmental factors of that organization. These internal environmental
factors are always controllable by nature. by using the SWOT model, the organization tries to
control these Internal factors. Along with this, an organization can predict the future of its own
business by using this most important SWOT model. By using the SWOT model, first of all, an
Organisation can evaluate possible threats and opportunities along with organizational strengths
and weaknesses. In addition to this, a way to overcome this weakness is also found by using this
model (Kurniawan et al., 2020).
Fig 02: SWOT Analysis
Source: researchgate.net, 2023.
Strength: One of the biggest strengths of the Ikea salt company is its clear vision. Because this
approach tries to connect the customers with the company despite the various unpredictable
situation in the market. Also, this company is a leading furniture retailer company worldwide,
which is currently successfully doing business in about 41 countries of the world.
Weakness: IKEA Globally operates its business in many countries around the world. Due to
this, it becomes extremely difficult for the company to comply with the different standards
related to conducting business in different countries. Nevertheless, the company tries its best to
make its products available to the customer in an affordable range while maintaining quality.
But due to the unpredictable situation at present, the cost of raw materials has increased.
Because of this, the profitability of the company is also being affected. In such a situation, it is
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proving difficult for the company to maintain quality with the increasing costs. Due to this, the
company has also faced complaints related to the quality of the products in some areas.
Opportunities: At present, after facing various unforeseen situations like covid-19 and global
warming, most people are becoming aware of the environment and their health. Because of this
people prefer to buy only such products which are health-oriented. That is, to make such a
product, the minimum amount of damage has been done to the environment. As well as the use
of which does not have any harmful effect on their health. In such a situation, the company can
earn a lot of revenue by doing toxic-free manufacturing along with participating in a CSR
program. now, companies participate in Corporate Social Responsibility (CSR) programs to
attract the customer as well as stakeholders along with the long-term survival of an organization
(Elalfy et al., 2020). By taking interest in a CSR program, mainly the organization carry out the
responsibilities and accountability in the context of the environment and society (Rodriguez-
Gonez et al., 2020).
Threats: Because of the economic recession, when the IKEA company started providing
furniture and home decor products to the customer at a low price, the company copied its design
and model and launched similar products in a relatively low price range. In this situation, the
company will have to introduce the product with some creativity to avoid losing its real customer
and stay ahead of the rival company. otherwise, the company will not be able to attract customers
over time and get a competitive advantage. To bring this creativity, the company will have to
enter the market as soon as possible with new strategies. Creativity always leads to unexpected
results, sometimes that is not imagined by any ones (Okpara, 2018).
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Conclusion and Recommendation
After this case study the main conclusion that comes out is that only affordable products cannot
able to attract people. Apart from affordability customers prefer quality, comfort, ease to use, and
other factors which do not harm the environment as well as society, etc. Based on these factors a
positive brand image is created of an organization among the people. So that if an organization
uses natural resources with the above-mentioned specialty then copying products and services do
not remain a cheap process for the competitors. On the contrary of it, if the organization uses
cheap raw materials for production, then there may be a chance is increased for copying the
product from rival companies. And thus competition for the organization in the market will
increase.
Because IKEA is a world-famous furniture retailing company. Which has managed to carve out
a leading position as a furniture retailer across the globe due to its clear vision. At present, it is
doing business in about 41 countries across the world. But by bringing creativity and diversity to
the product line like furniture and home decor, the company can establish its dominance on the
global level even more. Since the company has achieved a leading position as a furniture retailer
owing to the quality and behavior of its products. Taking advantage of this, the company should
try its hand at other product lines apart from furniture and home decor. But before launching a
new product, the company should take this step by doing all possible analyses of the market in
which the company is thinking of launching the product along with the demand for the particular
product. Apart from this, if the company enters emerging markets with a new product, then this
step taken by the company becomes more likely to be successful. And the company can try to
earn maximum revenue by taking advantage of the used customer. . Due to this effort, the
company will get a competitive advantage, as well as the business of the company will also
expand. Which is extremely important for the success of any small or large-scale company.
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References
1. Elalfy, A., Palaschuk, N., El-Bassiouny, D., Wilson, J. and Weber, O., 2020. Scoping the
evolution of corporate social responsibility (CSR) research in the sustainable
development goals (SDGs) era. Sustainability, 12(14), p.5544.
2. ikea.com, 2023. Ikea [Online] available at: <
https://www.ikea.com/us/en/this-is-ikea/about-us/our-heritage-pubde78e100> [last
Accessed on 07 January 2023].
3. ikea.com, 2023. Ikea [Online] available at: <https://www.ikea.com/us/en/this-is-ikea/>
[last Accessed on 07 January 2023].
4. Kurniawan, D., Iswahyudin, M.D. and Suciati, T.R., 2020. SWOT Analysis and Ansoff
Matrix in Creative Food Industry Business Development: A Study on Creative Food
Business “Komala”. Open Access Indonesia Journal of Social Sciences, 3(2), pp.128-
136.
5. Matovic, I.M., 2020. PESTEL analysis of external environment as a success factor of
startup business. ConScienS, p.96.
6. Okpara, F.O., 2018. The value of creativity and innovation in entrepreneurship. Journal
of Asia entrepreneurship and sustainability, 3(2), p.1.
7. researchgate.net, 2022. Researchgate [online] PESTEL analysis available at: <
https://www.researchgate.net/figure/PESTEL-analysis-Wheelen-Hunger-
2002_fig1_330662092> [last Accessed on 07 January 2023].
8. researchgate.net, 2022. Researchgate [online] SWOT analysis available at: <
https://www.researchgate.net/figure/SWOT-analysis-Matrix_fig1_348750654> [last
Accessed on 07 January 2023].
9. Rodriguez-Gomez, S., Arco-Castro, M.L., Lopez-Perez, M.V. and Rodríguez-Ariza, L.,
2020. Where does CSR come from and where does it go? A review of the state of the art.
Administrative Sciences, 10(3), p.60.
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