Business Report: IKEA's Competitive Position and Global Expansion

This report provides a comprehensive analysis of IKEA's competitive position and international business strategies. It begins with an introduction to business concepts and then focuses on a comparative analysis of IKEA's competitive standing in the market, highlighting its business activities and how they contribute to its competitive advantage. The report utilizes Porter's Five Forces model to assess the competitive environment. It also discusses the challenges of trading across borders, such as lack of local market knowledge, cultural differences, and logistical complexities. Furthermore, the report applies suitable theoretical tools to evaluate how IKEA can enhance its business performance. The report concludes with a summary of the key findings and recommendations for IKEA's continued success in the global market.

Business Project

Table of Contents
Introduction......................................................................................................................................1
Part 1................................................................................................................................................2
Explain comparative analysis of the company’s competitive position also its business activity
helps in gaining competitive advantage.................................................................................2
Discuss various challenges needs to be considered while trading across the borders............5
Part 2................................................................................................................................................8
Applying suitable theoretical tools, assess what needs to be considered to enhance their
business by the company........................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

Introduction
A business in an organisation which is engaged in the buying and selling of goods and
services in order to satisfy the customers needs and wants and also to maximise their profit. It is
a legal entity which is continuously engaged in the procurement and distribution of products and
services by an individual, continuously working towards offering quality services to their
targeted customers, with increasing competition in the market it becomes essential for the
business organisation to enhance their performance and gain competitive advantage in the
market. most of the companies are moving towards international market in order to increase their
market size and also customers base, international business is mainly define as the process of
carrying out all the business activity or buying and selling of goods and services at the
international level, it help business with vast number of opportunities present in the international
market. for business to continue to grow and survive in the market it is essential to analyse their
market and accordingly implement effective strategies. For this report IKEA Company is taken
as the base company. IKEA is one of the well established Swedish founded, Dutch international
private ready to assemble Furniture Company. The company was founded in 1943 by Ingvar
Kamprad offering services like ready to assemble furniture, food products, and home appliances
and so on. The company is considered to the world’s biggest furniture company since 2018
because of its excellent interior design work which is mainly related with the eco- friendly. The
company has strong financial position in the market with 41.3 billion revenues and with net
income of 1,731 million. Company ensures that their potential customers needs are fulfilled
effectively. under this report the detailed explanation of the chosen company and its comparative
study of its competitive position in the market along with analysis of how company gain
competitive advantage in the market which leads to enhancing their overall performance. In
addition to this various challenges needs to be considered while trading across border is also
highlighted in this report. Analysis of the various challenges helps business to take required
actions to deal with the challenges and smoothly carry out their activities. Further more suitable
theoretical tools are also highlighted in this report which helps business organisation to enhance
their performance in the marketplace effectively.
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Part 1
Explain comparative analysis of the company’s competitive position also its business activity
helps in gaining competitive advantage
The term comparative analysis is defined as the process of comparing two or more firms in order
to compare their product and services and their position in the marketplace, the comparative
analysis helps business organisation to analyse their most potential competitors and their
activities so that company can formulate its policies and strategies accordingly which leads them
towards gaining competitive advantage in the marketplace. Comparative analysis is the process
of analysing the competitors and their product and services in comparison to their own product
and services (Aubry and Lavoie-Tremblay, 2018). Mainly the financial position of the company
directly influence the functioning of the business and its performance in the marketplace, in
order to analyse the financial position of the company important trends, future forecast can be
taken into consideration effectively. In context to IKEA is one of the well established ready to
assemble furniture company offering advance and essential services to their customers, company
was founded by Ingvar Kamprad in 1943, company is a private company with 41.3 billion
revenue in 2019 with net income of around 1.19 billion euros in 2020.
The company has strong brand image in the market with strong competitiveness, with
strong financial position in the market place in the marketplace, the main competitors of the
company are Wal-Mart, Amazon, Wayfair and son on. The total revenue of the Wal-Mart is
514.4 billion in 2019 employing more than around 2.2 million employees globally whereas the
Amazon has total revenue of around 280,522 in 2019 and Wayfair having total revenue of 9.1
billion in 2019. The strong competitor available in the market with their revenue the selected
company is facing strong competition in the market place. IKEA has a essential and strong
position in the furniture market through selling ready to assemble furniture, the major country
the company has created a itself as the strong brand which sells it products specially the furniture
products at relatively lower prices which helps company to attract large number of customers. In
order to grow and develop itself in the competitive environment it becomes very essential for the
company to analyse it competitive analysis (Chatzoglou and Chatzoudes, 2018). In order to
analyse the competitive analysis of the IKEA the porter’s five force model is taken into
consideration as discussed below:
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Porter’s five force model: The porter’s five force model is one of the most essential strategic
tool used by the company in order to examine the competitive analysis of the company. The
analysis mainly includes five forces which helps company to understand the different forces
affecting the competitiveness of the company. It plays an essential role in analysing the
competitive environment of the company using five forces (Dupuis, 2018). In context to the
chosen company in order to analyse the competitive environment of the company the five forces
are discussed below:
Rivalry in the industry (High): If the level of competition present in the industry is high
or if competitors available in the market are more in number then it will directly influence the
performance of the business. The availability large numbers of competitors directly influence the
functioning and profitability of the business. In context to the IKEA, main competitors of the
company are Wal-Mart, Amazon, wayfair which has an impact on the operations of the
company. however with strong brand image in the market company has maintained its position
in the market.
Threat of new entrant (Low): The another forces is the threat of new entrant, if the new
entrant is entering into the market with new and some innovative products and services then it
will directly influence the functioning of the business, but whereas if there are strong barriers on
the entry of new firm in the market then it will create threat on the entry on new entrants into the
market. In context to the chosen company, the threat of new entrant is low, as level of
competition in the market is high and entry of new entrant will have to compete with the firms
like IKEA, Amazon which will be threat for the new entrant (Figueiredo and Paiva, 2019).
Bargaining power of buyers (High): If the numbers of numbers present in the market are
less in numbers than the bargaining power of the buyer will be high in the market, as if the
number of buyers are less for the company than company has to totally depend on than so such
case the buyers can easily bargain with the marketer, but whereas if the number of buyers are
more than their bargaining power will reduces company will have more options. In context to the
IKEA, company has trustworthy and loyal customers as chosen company provides standardised
ready to assemble furniture which enables them to attract large number of customers but still as
there are number of options available to buyers so they can easily shift from one brand to another
which leads to allowing buyers to bargain more in the marketplace.
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Bargaining power of suppliers (Less): The another force is the bargaining power of the
suppliers, if the numbers of suppliers are less in the market, then the their bargaining power will
be more similarly if the number of suppliers present in the market are more than their bargaining
power will be less. The suppliers plays an essential role in supply essential items for the
company , each company has large number of suppliers working towards making work easier
and smoother for the company effectively. The supplier work as per the requirement of the
company. In context to the selected company the suppliers has less bargaining power as they
have to follow the standards set by the company and has strong financial position so because of
that the suppliers of the company has to follow the standards set by the company as has to work
according to those standards only (Garnjost and Brown, 2018).
Threat of substitute products (Medium): The last force is the threat of substitute
products, is there are similar products available same as of the company’s product then it will
directly influence the functioning and profitability of the business. company working in the large
industry then there are chances of availability of substitute products in the marketplace. In
context to the IKEA, there are number of company dealing in the same product line but company
is offering unique and creative services such as ready to assemble furniture and also its interior
design work is mostly associated with the eco friendly work which leads company towards
medium threat of substitute products in the market.
The above analysis helps in analysing the competitive analysis of the chosen company,
the forces like medium threat of substitute products, low bargaining power of suppliers and low
threat of new entrant allow company to gain competitive advantage in the marketplace, company
is continuously working towards gaining competitive advantage in the marketplace through
continuously working towards sustainability and corporate social responsibility. The IKEA is
totally committed towards sustainability such as providing healthy home, reducing waste, saving
water and energy and also offering sustainable furniture (Hamilton and Webster, 2018). In
addition to this company’s interior design work is also eco friendly, all these factors helps
company to gain competitive advantage in the marketplace. in addition to this company has
strong brand position around the globe considered to the worlds largest furniture company since
2008 with more than 378 retail stores in around 30 countries. And also having strong financial
position with 41.3 billion revenue helps company to gain competitive advantage in the
marketplace. the strong competitiveness helps company to enhance their overall profitability and
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productivity and also helps them to enhance their overall performance in the marketplace
attracting large numbers of customers base.
Discuss various challenges needs to be considered while trading across the borders
In order to continue to grow in the competitive environment it becomes essential for the
business organisation to continuously enhance their performance and business. With increasing
globalisation companies are expanding their business in the international market which helps
them to expand their market size and gain competitive advantage effectively, but while trading
across the border company there are number of challenges that can be faced by the company. In
context to the selected company, while trading across the border company needs to effectively
consider the various challenges, some of the challenges that needs to be considered by the
company in terms of trading across the border are highlighted below:
Lack of knowledge of local market: one of the main challenge that can be faced by the
business organisation while trading across the border is the lack of knowledge of the local
market, one of the most frequent mistake done by the business organisation is not understanding
the importance of market research, as lack of information about the foreign market can create
challenge of the company’s planning to trade in the international market. Customers and
shopping trends and preferences are different in the different countries which is important for the
company to understand and analyse effectively (Johnson and Jordan, 2019). In addition to this
the just like the selling trends the buying pattern of the consumers can also be according to
various festivals and functions. So before trading into the international market it is very essential
for the business organisation to do through market research, collect essential data, conduct
surveys in order to analyse and gain important information about the market before trading into
it.
Language consideration: The another most common challenge faced by the business
organisation while trading into the foreign market is the language consideration, each country
has their own language, and when it comes to buying and selling of goods and services or
making consumers aware of the brand as well as product and services the language really
matters. As it helps in the smooth flow of information between the buyers and sellers. Suppose if
the seller trading in the foreign country but he doesn’t have any idea about the language spoken
in that particular country then in such case the seller won’t be able to make the consumers
understand about his product and services which will lead to failure (La Rocca and Snehota,
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2021). Not understanding the language of the country where the company is planning to trade
their products and services can create challenge for the business organisation. It is analysed that
the around majority of peoples won’t products if it is not in their own language, so company’s
needs to ensure that they are effectively considering this factor before trading into the
international market. Company can hire local trader to help them out in understanding the local
language and carrying out their activity effectively.
Cultural consideration: Another challenge is the cultural consideration, culture is
defined as the norms, value prevailing in the country, the culture work as the brand image of the
country. Each country has their own culture, its has direct influence on how individuals think,
behave and also communicate in the society (Lindgren, 2018). The culture has direct impact on
the buying behaviour of an individual, and also the kind of transaction they make in the country.
For example the culture of the Chinese market is totally different than the culture of the US
which leads to the difference in their consumers buying behaviour. The vast diversity of the
globe’s culture make its difficult for any business organisation, despite of their being skilled and
talented to understand and analyse the culture of each country there are planning to tap in. As
working against the norms and value of the country can create challenge for the company and
can directly influence its performance and profitability. Company needs to to proper research and
analysis of the culture of the country and for this Hofstede’s cultural dimension theory can be
taken into consideration which enable company to understand the culture of the country
effectively.
Shipping and logistics: The next challenge is the shipping and logistics, this is one of the
most important factor that needs to be considered by the business organisation when trading
across the border. The significant and ultimate purpose of the business is to create a brand
visibility in the international market and fulfil all the request from the customers end, and in
order to do so requires the packaging and shipping of goods from the distributors to the final
consumers. Effective shipping of the products and services is very essential for the final delivery
of the product while trading in the international market (Lohse and Zhivov, 2019). company
needs to find essential shipping partners offering top slash shipping along with vast reach and
required discounts. Not finding the right shipping and logistics partner will create challenge for
the company so company needs to ensure that they are finding the right shipping partner who is
having admittance to all locations getting best rates.
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Local promotion & marketing: The last challenge that needs to be considered by the
company while trading into the international market is the local promotion and marketing,
analysing the needs and wants of the targeted customers is very essential for the business
organisation so as to satisfy their needs accordingly and enhance their satisfaction level.
Whenever it comes to attracting large number of customers or making them aware of the
products and Services Company uses numerous promotional and marketing techniques. The
various. The company often faces challenges while attracting large numbers of customers to
make them buy form the retail stores, as market is dominated by various factors such as cultural,
social, festivities. So in order to attract and influence the customers it becomes very essential for
the business organisation to understand the target customers, their norms and value before
advertising or using any promotional activities, interacting with the potential customers before
presenting them with any promotional activity is very important for long lasting impression on
them (Milani, 2019). In the international market promoting products without any information
about the audience will create challenge for the company. So company needs to have proper
understanding of the culture, social system, norms and customers of local country before
presenting any kind of marketing and promotional activity.
From the above discussion, for IKEA to trade in the international market the above
challenges needs to be taken into consideration by the company, so as to avoid any kind of
challenges and problem while trading their products and services. In addition to this effective
consideration of the above challenges will allow company to trade their products and services
smoothly and easily and without any problem. It will help them to enhance their overall
performance and increase their profitability and productivity. Smooth trading into the
international market will also allow company to increase their customer’s base ( Ram and
Ronggui, 2018). Analysis of above challenges will help company to formulate essential strategy
and actions which will help them to deal with the challenges effectively and efficiently leading
company towards growth and success.
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Part 2
Applying suitable theoretical tools, assess what needs to be considered to enhance their business
by the company
There are various theoretical tools and strategies available which can be used by the
business organisation in order to enhance their business and performance in the marketplace. in
context to the IKEA, the theoretical tools that can be used by the company to enhance their
business are highlighted below:
Porter’s generic strategy: The porter’s generic strategy is one of the most essential strategic
tool used by company to gain competitive advantage in the marketplace. This tool was given by
Michael porter in 1985. It includes mainly four strategy which helps company to gain
competitive advantage in the marketplace (von Danwitz, 2018). In context to the chosen
company the various strategy is discussed below:
Cost leadership strategy: Under this strategy the business focus on dropping the cost of
the products in order to attract large number of customers, this focus mainly focus on reducing
the cost in order to achieve competitive advantage in the marketplace.
Differentiation strategy: The nest strategy is the differentiation strategy, under this
strategy the key focus of the company is to offer unique and different product in order to achieve
competitive advantage in the market, it allows business to be different from their competitors.
Cost focus strategy: The cost focus strategy is the extension of cost leadership strategy,
under this strategy the main aim of the company is to focus on the target segment or niche
market. Company offer product and services at the low cost to the niche market (Tesch and
Brillinger, 2019).
Differentiation focus strategy: Another type of the strategy is the differentiation focus
strategy, this strategy allow business to offer unique and differentiated products and services to
the niche market to enhance their business. This allows business to focus on the niche market.
From the above analysis, in order to enhance their business IKEA can use differentiation
focus strategy, this will allow company to focus on niche market and attracting them through
offering them unique and differentiated products and services. This will allow business to gain
competitive advantage.
Ansoff Matrix: The another theoretical tool that can be considered by the company in order to
enhance their business is the Ansoff strategy, this strategy allows business organisation to plan
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and implement effective strategy which leads them towards growth and efficiency (Wu and
Martin, 2018). In context to the chosen organisation the various strategy are discussed below:
Market Penetration: The first strategy is the market penetration, this strategy allows
business organisation to focus on the selling existing product into the existing market, this allows
business organisation to increase their performance and profitability. This can be done through
increasing the promotion of existing products.
Product development: The product development strategy allows business organisation is to
bring new products into the existing market in order to increase their sale, this can be done
through proper market research analysing the needs of their existing customers and accordingly
introducing new product to satisfy their needs.
Market Development: The market development strategy allows business organisation to focus
on entering new market with their already well established products, using this strategy will
helps business organisation to expand their market size and enhance their business, this can be
done through entering into international market.
Diversification: The last one is the Diversification, this strategy is one of the most risky
strategy that can be used by business organisation as this involves entering new market with new
product, and introduction of new product into entirely new market can be risky but with proper
analysis of market can also lead business earning rewards (Thomas, 2019).
From above analysis, IKEA can use product development strategy in order to enhance their
business and gain competitive advantage in the marketplace, this strategy will help company to
introduced new product into existing market. company has strong brand image among the
customers so introducing new product into the existing market will be easier for them and will
help them to enhance their business and attract large number of customers which leads to
increasing their customers base effectively (Waters, 2018).
Conclusion
Form the above report it can be concluded that in order to survive and grow in an increasing
competitive environment it is very essential for the business organisation to gain competitive
advantage in the market, the business organisation which is an legal entity always works towards
enhancing their performance through offering quality services to their customers and maximising
their profit, and it is also analysed that in order to increasing their market size and increase their
customer of customers business organisation are increasingly moving towards international
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market. This report helps in analysing and understanding various concept of marketing. This
report starts with detailed description about the company and its competitors as well as its
financial position in the market, along with the product and services offered by the company.
This report is mainly divided into two parts, the first part of the company highlights the
comparative analysis of the company’s competitive position in the market, comparative analysis
helps business to understand the number of competitors available in the market and how
company can maintain its position in the marketplace effectively, in order to analyse the
competitive analysis of the company the porter’s five force model is used. Detailed description
of each force of the analysis helps in analysing how considering each factor company can
maintain its competitive position in the marketplace. to continue to enhance their business it is
important for the company to increase their market size and this can be done through expanding
their business in the international market, but while doing so there are various challenges
available that can be faced by the company, under this report detailed analysis of various
challenges that needs to be considered by the chosen company while trading across the border is
also highlighted. In addition to this the second part of the report highlights the suitable
theoretical tools that can be used by the selected company in order to enhance their business
effectively. So in order to enhance the business of the chosen company the porter’s generic
strategy and Ansoff strategy is taken into consideration under this report. This strategic tool will
help company to analyse the best suitable strategy that can be used in order to gain competitive
advantage in the market and enhance their overall performance and productivity.
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