Strategic Analysis of IKEA: Porter's Five Forces and Change Management

This report provides a comprehensive strategic analysis of IKEA, a multinational home furnishing company. It begins with an introduction to strategic management and then delves into IKEA's mission, vision, objectives, and values. The main body of the report includes a detailed SWOT analysis, examining IKEA's strengths, weaknesses, opportunities, and threats, along with a discussion of Porter's Five Forces to assess the competitive landscape. The report also addresses the importance of change management based on the complexity of the transformation process. The analysis considers IKEA's market position, competitive advantages, and potential challenges, offering insights into its strategic performance and future prospects. The report concludes with a summary of findings and a list of references.

STRATEGIC
MANAGEMENT

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Mission.........................................................................................................................................3
Vision...........................................................................................................................................3
Objectives....................................................................................................................................3
Values..........................................................................................................................................3
SWOT analysis............................................................................................................................4
Porter’s five forces.......................................................................................................................6
Importance of change management based on the complexity of the transformation process.....8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic management is the management activity through which it tends to develop
organization’s working strategy such that company is able to achieve its targets this is done by
considering company’s resources. IKEA is multinational organization which provides designer
house hold furniture products at an affordable pricing to its customers. Analysis of company’s
performance in terms of its mission and vision is done in this report. Effectiveness of
organizational strategy in terms of its goal achievement capabilities is analysed. With that
company’s efficiency in terms of managing organizational activities is also analysed in this
report. Analysis of company’s strength and weaknesses in terms of tacking with threats and
opportunities is also analysed in the report. Evaluation of IKEA's strategic performance in terms
of four aspects like its strength, weaknesses, opportunities and threats is done in the report (Zhou
and et.al, 2019).
MAIN BODY
Mission
The mission slogan of IKEA is as following “Our business idea supports this vision by
offering a wide range of well-designed, functional home furnishing products at prices so low that
as many people as possible will be able to afford them” (Mission statement academy, 2020).
Vision
The vision statement of IKEA is “To create better everyday life for the many people”
(Mission statement academy, 2020).
Objectives
“To offer a wide range of home furnishing items of good design and function, excellent
quality and durability, at prices so low that the majority of people can afford to buy them” (Find
any answer, 2020).
Values
“Leading by example, will power and humbleness, differentiation, desire for innovation
and creativity, enthusiasm and togetherness, and consciousness for cost.”

SWOT analysis
It is very important for the organization to know their strengths and weaknesses in the
market so that there is going to be effective decisions and planning can be done effectively in the
market. The internal factors have to be well maintained therefore IKEA would use this
framework in order to be able to analyse the market effectively and efficiently making the
organization have higher profitability and performance in the market as well.
Figure 1: Ikea Swot Analysis 2016
(Source: Cheshnotes, 2016)
 Strengths
IKEA is having a lot of work experience and knowledge of the market therefore they will be
able to make the right decisions and planning for the organization in order to be able to gain the
competitive advantage so that there is going to be higher performance. The quality of the
products and services of IKEA is very high making the organization has a stable and loyalty of
the customers in the organization which is going to help the company have higher productivity in
the organization (Meyer, Neck and Meeks, 2017). The culture of having a strong sustainability in

the market is also present in the company which is a great factor for the organization to have in
the market. The products and services are also affordable for the customers and matching the
demands of the customers as well making the organization have a strong market presence as well
as brand reputation in the market. The company is having a strong financial position in the
market as well which is that the company is having a revenue of $44.6 billion which is a great
factor for the organization so that there is going to be higher brand value in the competition
which is raising rapidly in the market.
 Weaknesses
To get higher profitability margins the organization is not having a control on the standards
of the products which is a great drawback of the company. There is not enough investment which
the organization is making the organization in order to be able to match the expectations and
standards of the customers which is going to get in limitation in the organization which is not
good for a long run. The company is dependent on the third party for manufacturing of the goods
and products which the company is producing which is not good for the reputation of the
organization (Grant and Baden-Fuller, 2018). The company is having a bad press image which is
not good for the organization to get in more customers and the sales are going to be limited of
the organization in the market. It is important for the organization to maintain their product’s
quality only then the organization will be able to gain the value of brand in the market so that
there is going to be effective functioning which is going to be present.
 Opportunities
The company can expand themselves in developing countries like Brazil, China, India, etc so
that the organization is going to have higher sales and profitability margins for themselves. The
company has branched out in limited a location which is going to affect the functioning of the
organization. Online is a great platform which the organization takes into consideration and
makes the full use of this factor so that they will be able to reach out a larger audience which is
going to make the organization have higher sales (Favoreu, Carassus and Maurel, 2016). The
company will have to make sure that they are giving out more information to the customers so
that there is going to be higher performance which is going to be present. The company will have
to have premium quality products in the organization as well so that there are going to be higher

loyalty and can attract more customers in the organization. The revenues of the organization are
also going to improve which is a great factor for the company to have. The company must take
advantage of global expansion so that there is going to be higher performance which is going to
be present and make the organization have higher sales and operations in the market.
 Threats
There is a firm competition which is present in the organization so that there is going to be
higher performance which is going to be present. There is tough competition in the market like
Pepperfry, etc which are online stores which is going to impact on the brand and brand leading.
The company will also have to make sure that the lawsuits are being followed in the organization
so that the customers are going to have higher performance and also the employees will have
higher satisfaction working in IKEA so that there is going to be higher performance and sales
(Frue, 2018). The company will have to hire the right employees and lower wages for them so
that there is going to be higher profitability in the market so that there is going to be higher brand
value. It is a big challenge for the company in the market for getting in recycling so that there is
going to be effective functioning which is going to be present.
Porter’s five forces
The organization needs to understand the competition in the market so that there are
going to be effective measures which an organization can take for themselves which is going to
make the performance and brand value in the market increase. The competition in the market is
increasing therefore it is very important for the organization to analyse the market and take the
right measures which is going to make the organization have higher market share and customers
base. The products and services of IKEA will also have to be maintained which is going to be a
very effective factor for the organization to have for a long run in the market. The following
report is going to discuss the competitive analysis of IKEA in the market with the help of
porter’s five forces.
 Competitive rivalry (High)

There is a lot of competition which is present in the market for IKEA which needs to be
analysed effectively and efficiently so that there are going to be effective decisions and planning
which can be done in the organization. There are strong roots which IKEA has developed for
them in the market which can help the organization be able to operate effectively in the market
for a long run (Nickols, 2016). The international competitors for IKEA are Wal-Mart, Amazon,
Tesco are going to be a great threat for the organization and they might take away the loyal
customers and market share of the company as well in the market which can make the
organization have limitations on the profit margins. There is a lot of investment which IKEA will
also have to make in market so that the company will be able to compete in the market
effectively which is very important. The company is having a very good collection of furniture
and the company’s competitive advantage in the competition is also this factor therefore it is
important for the company to be able to have the right methods to be used in the company to be
able to operate effectively. The company is having the maximum level of market share in the
international market which is a great factor for the company to have which can impact the
performance of the organization.
 Bargaining power of suppliers (Low)
The company is having a lot of suppliers which are present in IKEA because of the network
and contacts the organization has developed for themselves over years. The company shifts from
one supplier to another in order to have higher cost friendly productivity level in the organization
which is going to be good for a long run of the business in the market. There have to be
resources which are renewable in nature so that there is going to be higher sustainability which is
going to be present in the company (Barney, 2017). The relationship with the suppliers need to
be maintained so that there is going to be effective functioning making the development of the
company improve and the reputation of the company as well. Material of suppliers getting the
raw material for IKEA needs to be of good quality so that there is going to be smoother
functioning and image in front of the customers be well maintained.
 Bargaining power of consumers (Medium)
The demands and expectations of the customers is changing therefore it is important for the
organization to get in these changes effectively so that there is going to be effective growth

which is going to be present. There is a lot of innovation as well which is required in an
organization making the satisfaction and demands of the customers be matched which is going to
be very good. The company is switching from one method and measure to another from time to
time so that there is going to be cost friendly methods which the company can develop making
the organization have better functioning (Hanson and et.al., 2016). The company is having a
large market share and good investment in designs and innovation as well which the company is
putting in the company making the organization have higher sales and lower control of
consumers. The products of the company are set according to the customers and also the lifestyle
and values of customers are present in the products making the company have better image in the
market of the organization. Contribution of the customers is huge in the company because of
which the economic stability is present in the company and there are more ideas which generate
from time to time in the organization making the company have higher branding for themselves.
 Threat of new entrants (Low)
There is a huge amount which has been put in by IKEA in the market to be able to develop
and have a control in the market as well. Any new business will not have so much of investment
to make in the market which is why IKEA will be able to maintain their standards and
functioning in the market. Competing with an experienced organization is very difficult which is
why any small business will not want to take a risk to be able to take away the market share of
IKEA. The company analyses the external factors which can affect the organization very well so
that they can maintain the standards and reputation in the market which is going to be very good
for the overall development (Dudovskiy, 2019). Skills and knowledge of IKEA in the market is
high and competing with such an organization is a great risk which no other organization would
like to take in the market. There has to be sufficient productivity and operations which IKEA is
aware of which is why they are being able to maintain their satisfaction level and match the
demands from time to time making them be sustained in the organization for a long run.
 Threat of substitute (Medium)
The products and services of IKEA are very imitable in nature and that needs to be well
maintained by the organization so that there is going to be effective sales which would be
present. The designs and other innovations which IKEA is making in the market are what other

organizations can copy therefore it is important for the company to be able to function
effectively in the market. Company will have to work on their patent and copyrights on the
products and services which the organization is providing in the market so that there is going to
be effective functioning and higher sales (Alnoukari and Hanano, 2017). Company has got a
loyal set of customers but when they are given more varieties they tend to shift from one
company to another therefore IKEA will have to use their knowledge and skills in the market
effectively so that there would be higher sales and profit margins in the market. The market has a
very complex environment and IKEA is aware of this factor and the organization can take full
advantage of this factor which is a great factor for the company.
Importance of change management based on the complexity of the transformation process
Changes take a lot of costs from the organization so that they will be able to operate
effectively and efficiently in the market. IKEA has invested a lot so that there is going to be
effective changes which can come in the organization. There are a lot of risks in the business
when any change is taking place because it is going to be new in the business. Sustainability for
IKEA in the market is important because the company is having a stable operations and brand
value in the market which needs to be present to maintain the competitive advantage in the
market (Hanson and et.al., 2016). There are a lot of troubles which the company is facing to get
in the changes in the organization since they are not being able to provide the right measures for
competitive advantage. Risks are involved in getting in changes because it is going to get in
unique identity for the company but the products and services are not going to be present in the
market from before which is a risk because the customers are very picky for this in the market.
IKEA is having a strong portfolio and standard for themselves in the market which is why it is
important for the company to be able to operate effectively in the market. Placing the products
effectively is strength of IKEA which they have got from the years of experience and that is
going to make the company have a strong sustainability for their new products and services and
changes will be able to come in the company effectively.

CONCLUSION
From the above analyses it can be concluded that although IKEA is a multinational
organization which provide wide range of products to its customers thus company is responsible
for providing products as per customer requirements. Due to this company has to change its
working process as per changing market trends which will enable it to maintain its customer
count and at the same time attract new customers. Thus in order to achieve this IKEA has to
efficiently manage its resources and develop organizational working strategy as per company’s
strength focussing on its weak areas. With this company can not only improve its performance
by improving weak areas and at the same time can maintain the originality of its personal
essence.

REFERENCES
Books and Journals
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assets: Label proliferation and theory development in the field of strategic
management. The SMS Blackwell handbook of organizational capabilities. pp.422-426.
Favoreu, C., Carassus, D. and Maurel, C., 2016. Strategic management in the public sector: a
rational, political or collaborative approach?. International Review of Administrative
Sciences. 82(3). pp.435-453.
Grant, R.M. and Baden-Fuller, C., 2018. How to develop strategic management competency:
Reconsidering the learning goals and knowledge requirements of the core strategy
course. Academy of Management Learning & Education. 17(3). pp.322-338.
Hanson, D and et.al., 2016. Strategic management: Competitiveness and globalisation. Cengage
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Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
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Nickols, F., 2016. Strategy, strategic management, strategic planning and strategic
thinking. Management Journal. 1(1). pp.4-7.
Zhou, J. and et.al, 2019. A selection model based on SWOT analysis for determining a suitable
strategy of prefabrication implementation in rural areas. Sustainable Cities and
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