Comprehensive Analysis of IKEA's Value Chain and Business Strategies

This report offers a comprehensive internal analysis of IKEA, a global furniture retailer, examining its value chain, business strategy, and strategic recommendations. The analysis begins with an overview of IKEA's decentralized operations, inbound and outbound logistics, marketing, and customer service. A SWOT analysis highlights IKEA's strengths, such as its clear vision and cost leadership, and weaknesses, including challenges in maintaining quality and environmental policies. The report also explores opportunities for expansion and threats from competitors. Furthermore, it delves into IKEA's business strategy, emphasizing cost leadership, differentiation, and an integrated approach. Recommendations include strengthening customer loyalty, promoting green strategies, and leveraging direct marketing. The report concludes with a discussion of IKEA's potential in the Indian market, considering both opportunities and challenges.

5. Internal Analysis of IKEA
Value chain analysis
Value chain analysis of IKEA identifies business activities that can create value and competitive
advantage to the global furniture retailer.
Operations- IKEA follows de-centralized business strategy in running its global
operations. According to this strategy regional managers are granted decision making. It is the
largest producer of wooden furniture in the world.
Inbound logistic- It is connected with buying raw material from 1002 suppliers located
in 51 nations globally and relationships with supplier are preserved via 42 trading offices around
the world. It includes the economy of scale and existence of strategic relationship with provider.
Outbound logistic- Ikea function its business in 28 market all around the world. The
company provides two type of delivery, one is parcel delivery and other is truck delivery. The
delivery of online purchase is free of charge.
Marketing and sales- IKEA uses print media advertising, sales promotion, events and
experiences, public relation and direct marketing techniques. Online sales channel is also utilized
by IKEA. Traditional store sales of IKEA accounted for 95% of sales.
IKEA service- Customer service is the primary activity in value chain. It provides
telephone customer service, offering refund and exchange of goods according to their feedback
towards good. If customers forget one part of furniture in store than no need to go to IKEA store,
they helped with telephone call.

IKEA is UK based organisation which sales furniture, home and kitchen appliance and
many other products. It has been worlds the largest furniture retailer organisation since 2008.
Internal analysis of the organisation considers as a swot analysis(Rothaermel, 2015).
Strength-
Its biggest strength is that it has clear vision,
which is to add value to the customers
irrespective of the market condition. It has well
defined business strategy which through it
increase the customers. They are leading the
market through applying the best strategies
which from they make existence in mind of
customers, which is called positioning. It
applying the strategy in which customers can
design the product according to their demand
and need. They focus on cost leadership. IKEA
has emerged as the worlds leading retailer of
furniture. IKEA has ability to create buzz
before opening in India. It has complete
shopping experience so it is easy to open in
India. IKEA is using the metrics provided by
KPIs or key performance indicators that will
include increased use of renewable materials
IKEA will smartly use their raw materials with
the help of metrics. It will be helpful of the
company for establishing maintaining the long
terms relationships with the suppliers in India.
Weakness-
IKEA operates in multiple countries around the
world, so it is difficult to control all the
locations in good manner. It mainly focuses on
cost leadership and through this sometimes the
quality goes for a toss. Cost of raw material has
gone up and it makes impact on the
profitability of the organisation. Sometimes it
is difficult to maintain the quality in context of
increasing cost. Company have problem
regarding environmental policies to its
customers and shareholders. It is the weakness
of IKEA to opening in India. Customers have
different preferences in chosen country and it
is not easy to open new market in selected
nation(Goel and Garg, 2018). Sometimes it is
difficult for the companies to maintain the
quality in context of increasing costs for
several locations it can be a cause of loss for
IKEA's company while they will enter in the
Indian market.
Opportunities-
The organisation have opportunities to increase
the branches in all around the world and make
Threats-
IKEA has low cost business model and its
copied by the other competitors. That means

more profit. They will have not faced many
problems just because of their goodwill. It has
big opportunity with having green business
model. Customers like to buy such products
that are environmentally conscious. It has
second opportunity to expand the business
because of having cost leadership. Addition of
value to the customers is another significant
opportunity. IKEA is already drawing up plans
to enter markets like India with a clear strategy
of cost leadership, which it hopes, would yield
benefits to the company. With the cost cutting
efficiency IKEA can develop itself in India.
India is second the largest country in
population so, it will be an opportunity for
IKEA to earn profit by expanding business in
India.
the company has to innovate something new so
that the low cost can would not impact on it.
IKEA has to come up with new strategies.
They have to focus on social trends because it
also makes impact on the business. There is
threat for IKEA to opening in India market just
because difference taste and preferences of
consumers. There is big market of every
product so it is not easy to survive in
competition in market of India. Many strong
competitors are there in Indian market which
can affect the business of IKEA in India.
6. IKEA business strategy -
This strategy is built upon the IKEA concept. It starts with the idea of providing the range
of home furnishing products which are affordable for many people. This strategy will include
quality, designing, combine functions and value. The IKEA concept is existing in each and every
part of the company such as- packing, sourcing, distributing, designing etc.
(Ngai and Falkheimer, 2017).
Cost leadership- Effectiveness of price is one of the solid base of IKEA for the
competitive advantage. All the global retailer of furniture are not able to offer their products in
low price as compare to IKEA. IKEA is mainly focusing on the international marketing. Which
will help to expand its business across the world. There is opportunity to expand business in
India because many people in India, wants product at lower cost so this strategy can help IKEA.

to being globally. Company can increase the variety of their products that can help to expand the
business in India. IKEA is focusing on the cost leadership strategy there are many young buyers
are focusing on the fashionable furniture and accessories at low cost. IKEA has targeted market
segmentations fr these types of customers. IKEA is conducting various activities to keep their
cost low in india such as- instead of relaying primarily on third party manufacturers, the
engineers of company will design low-cost modular of furniture ready for assemble by
customers. Company is selling many products in the lowest prices. Company is focusing to
provide the best quality of their products. Furnishing chain and home improvement traditionally
engaged for new market development in different manner. IKEA has 28 markets worldwide and
340 stores across the world(Ngai and Falkheimer, 2017).
Differentiations- it is a second strategy that can be used by IKEA to differentiate their
products in compare with other companies. Differentiations is based upon the products and
delivery process and making approach and many other products. IKEA can keep low cost of
products than the premium price to get better profitability in India. There are many competitors
whom can copy the goods and ideas of IKEA so it will use low pricing strategy through large -
scale procurement.
Integrated strategy- Integrated strategy includes all the various strategies which can
help to IKEA to expand its business. This strategy also control the process of marketing and its
factors such as- suppliers, retailers, distributes. In this kind of strategy IKEA will take overall
control over one of more phases in the production and distribution of products and services and it
can help the company to expand the business in India. It has home delivery and flexible return
policy system so it is easy to attract customers for it.
IKEA also adopting the store location strategy to expand its business across the world. In
the US, most consumer use personal vehicles, IKEA outlet are normally situated in the suburbs.
People of china are mostly using the public transportation so the IKEA has set up their outlets
outside the cities which are connected by rail and metro networks(Jin-Yuan and et.al., 2016).

Recommendations
From the above study of IKEA it has been concluded that there were external and internal
factors which shows the condition of the company in the world. Customers are aware about the
products which sold by IKEA, but there is a problem of customer loyalty. It provides low cost
products so some customers can not believe on the product quality. IKEA has to develop
customer loyalty. IKEA can promote green strategy to increase the customers. They can also
promote giving back to community. Direct marketing is needed to IKEA for better performance
in the competitive market.

REFERENCES
Books and Journals
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education,.
Goel, R. and Garg, S., 2018. India As a Marketplace: A Case Study of IKEA. Available at SSRN
3282924.
Ngai, S.B.C. and Falkheimer, J., 2017. How IKEA turned a crisis into an opportunity. Public
Relations Review.43(1). pp.246-248.
Jin-Yuan and et.al., 2016. Analysis for Cost Leadership Strategy and Core Competitiveness
Points of IKEA CO. DEStech Transactions on Economics, Business and Management,
(iceme-ebm).