MGMT3347 - Strategic Management: IKEA Case Study Analysis Report

This report presents a comprehensive strategic analysis of IKEA, examining its business environment and competitive position. The analysis includes a PESTLE analysis, evaluating political, economic, social, technological, legal, and environmental factors impacting IKEA's operations. It also features a Porter's Five Forces analysis to assess the competitive intensity within the industry, evaluating factors like rivalry among existing competitors, the threat of new entrants and substitutes, and the bargaining power of buyers and suppliers. Furthermore, a SWOT analysis is conducted to identify IKEA's strengths, weaknesses, opportunities, and threats, providing insights into its internal capabilities and external environment. The report concludes with recommendations aimed at enhancing IKEA's strategic approach, particularly focusing on expansion into developing economies and the use of eco-friendly raw materials to build a stronger customer base and brand image. This detailed analysis aims to provide a clear understanding of IKEA's strategic management and future prospects.

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STRATEGIC MANAGEMENT
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Table of Contents
Pestle Analysis.................................................................................................................................2
Political........................................................................................................................................2
Economic.....................................................................................................................................2
Social...........................................................................................................................................3
Technological..............................................................................................................................3
Legal............................................................................................................................................4
Environmental..............................................................................................................................4
Porter's 5 force analysis...................................................................................................................5
SWOT analysis................................................................................................................................9
Conclusion.....................................................................................................................................10
Recommendations..........................................................................................................................10
Reference.......................................................................................................................................13
Appendices....................................................................................................................................16
Appendix 1.................................................................................................................................16
Appendix 2.................................................................................................................................17

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Pestle Analysis
Political
According to Rastogi and Trivedi (2016) the political factors are identified as the most
important aspect for any business organisations in doing business internationally. For IKEA, the
political factors are considered to be the most important aspects in order to bring sustainability in
business. The political stability plays a pivotal part in order to bring better and healthy business
practice. As a result of that it becomes important for IKEA to focus on the political stability of
the Australian government (Van den Steen and Galor 2006). Based on figure 1, it can be stated
that in Australia the political stability is a bit disturbed due to the internal pressures. As a result
of that for IKEA also some business disruption can be emerged that can leave negative impact on
the entire business orientation of the company. However, a strong political decorum and
constitutional government can help the organisation to create effective business environment for
the company in near future.
Economic
As IKEA is an international company therefore, it depends on the liberal economic
structure. Despite of having a great set back from the international recession, IKEA is able to
develop its Australian market due to economic opportunities and steady growth of the market. A
steady growth of economy in the Australian market with an average of 2.6% can deliver a good
and effective exposure for IKEA to set its market effectively in the Australian market. In this
context, it can be stated that the economic liberty and free trade practices in the Australian
market help IKEA to refurbish its business effectively. High competition in the Australian
market with healthy transformation of the customer behaviour is considered to be a healthy

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business environment for IKEA to do business. High pricing with quality material is one of the
basic feature in the Australian market. As one of the important developed countries, continuous
inflow of financial support is a common trend in Australia. Therefore, it will never be a problem
for IKEA to survive.
Social
The Australian people are very friendly and fond of quality and aesthetic matters
products. According to the research of Finger et al. (2018) it can be stated that most of the
Australian are living a high lifestyle. Therefore, price is not a factor for them to buy products.
However, the quality of the products and its uniqueness is definitely a close concern for the
Australian people and is considered to be one of the major success factors for business
organisations. Therefore, for IKEA also it will be a great opportunity to grab the market of
Australian in an extensive manner do that it will deliver a strategic advantage for the
organisation to facilitate better market capitalisation. Apart from that another important facets of
the Australian society is its open cultural practices. Liberal viewpoint with respecting personal
vision and taste are major attributes of Australian society. Therefore, for IKEA those factors can
be a key aspects to deal with in order to get success in a proper manner.
Technological
Technology is considered to be one of the mainstay for getting rapid success in business.
Howell, van Beers and Doorn (2018) advocated that the advent of globalisation made it more
critical and complex for the business companies to survive without having high progress in
technology. Moreover, Mian, Lamine and Fayolle (2016) opined that technology would provide
a unique brand value for the business organisations in order to survive in the market strategically.
Therefore, for IKEA also technology plays a pivotal role in the context of organisational success.

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As a matter of fact, support from the government is definitely a boost up factor for IKEA and the
Australian government is always encouraging the business companies to incorporate new
technologies. Nevertheless, Wu, Straub and Liang (2015) pointed out that using new technology
can increase the price of the products but for developed countries like Australia it is not a big
threat. Therefore, there will be great opportunity for IKEA to avail best and cutting edge
technologies in the context of creating a unique brand image.
Legal
The Australian government is highly focused on its legal framework and the companies
are also abide to follow the government regulations. There are some basic regulatory practices
that all the business companies have to follow while doing business in Australia. For instance,
the Fair Work Act is entitled to safeguard the rights of the employees (fairwork.gov.au 2019). It
is important for IKEA to follow the guidelines of Fair Work Ombudsmen and implement
workplace health and safety. Apart from that the business organisations have to follow the
standards of Australian Competition and Consumer commission (ACCC). The Product Liability
Regulation is also there that help the business organisation to follow the prescribed standards and
facilitate a good and healthy business environment. Besides this, trading registration under the
valid business name of the organisation and licensing are also essential for the business
organisations to facilitate an effective and exclusive business environment in Australia.
Environmental
The Australian government is highly supportive in doing green business. As a matter of
fact, it becomes a trend for the business organisations in Australia to opt for the green business
method as a sustainable business approach in order to bring efficacy into their business practice
in the competitive market. In addition to this, there is also the Environment Protection and

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Biodiversity Conservation Act 1999 that compels the business organisation to focus on the
environmental sustainability and take adequate measure in order to prevent environmental
degradation (environment.gov.au 2019). As a result of that the environmental matters are very
serious in Australia due to its huge ecological diversity. In response to this, it can be stated that
for IKEA it is important to get a license from the government while using woods and engaging in
deforestation. There are some guidelines and government stated procedures that the business
companies have to follow.
Porter's 5 force analysis
Rivalry among existing competitors in the
market (High)
The organization, Ikea, face intense
competition in the Australian due to the
presence of companies like Galiform Plc,
Walmart stores, Euromarket designs, Argos,
Amazon and the like (Brown et al. 2016). The
intense competition in the existi9ng markets
have affected the sustenance elated factors of
the organization while operating in the
different market segments. On the other hand,
the changing preferences of the customers and
the technological innovations that are initiated
by the organization in the market levied an
intense pressure on the venture while
operating in eh Australian markets (Daunfeldt

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et al. 2017). The offers that are positioned by
the competitors on the purchase of furniture
added to the competitive rivalry for the
organization. However, the concerned
organization holds a leading position in the
market due to its superior supply chain
management tactics and the providence of
high quality propositions in competitive
prices.
Threat of new entrants (Low) The threat of new entrants in the market is
relatively low due to the polarization of the
market structure and the presence of huge
conglomerates. On the other hand, it has been
noted that the market structure in Australia is
already saturated through the presence of high
performing organizations which has created
an insubstantial position for the venture in
maintaining the efficiency of the operations
(Baier, Rese and Schreiber 2016). The lack
of new entrants in the market has also
significantly reduced the threat for Ikea while
operating as per the emerging needs of the
customers through the latest technologies as

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per the knowledge of the venture. The key
elements of change in the market structure is
based on the efficiency of the operation in
orientation with the needs of the venture
while operating in the different markets.
Bargaining power of the buyers (High) The organization operates in an economy
which offers strong bargaining power to the
buyers due to the presence of large number of
companies offering the same kind of
proposition. On the other hand, the
competitive nature of the prices and the
quality of the products that are delivered by
the organizations are similar which
encourages the buying power of the buyers
(Helmefalk 2016). Therefore, the concerned
organization encounters a risk related to the
switching taste of the customers which might
again affect the competitive edge of the
venture.
Bargaining power of the suppliers (Low) The bargaining power of the suppliers in the
economy is low due to the presence of a
substantial amount of suppliers. Therefore,
the organization is in a convenient position in

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the markets while negotiating with the
suppliers over the cost of raw materials due to
the presence of huge amount of alternatives
(Alänge, Clancy and Marmgren 2016). The
lower bargaining power of the suppliers
enabled the organization in reducing the cost
of raw materials and thereby acquiring huge
margins on the sales. On the other hand, the
organization also focused on forming strategic
long term relations with the suppliers with the
objective of winning over the trust and
confidence for making fruitful negotiations to
contribute to the operation of the venture
while operating as per the needs of the
customers. The increased R&D operations are
based on the cost cutting techniques
employed by the same over the suppliers
which enabled the venture in developing
propositions as per the needs of the customers
(Ngai and Falkheimer 2017).
Threat of substitutes (Low) The organization face a minimal threat from
the substitutes as the propositions that are
made by the same are specifically hand

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crafted and unique. The uniqueness of the
propositions enabled the venture in reducing
the threat of substitutes significantly which
enabled the venture in maintaining the
efficiency of the operation while operating in
the different markets.
SWOT analysis
Strength Opportunity
 Global reputation with slim furniture
design.
 Vast range of stores with an effective
distribution system.
 An integrated approach towards the
manufacturing and supply chain.
 Strong revenue growth and
profitability.
 Expanding in the developing countries
where steady economic growth can be
identified.
 Exploring supply of raw materials in
cheap price.
 Developing e-commerce and picked up
services.
Weakness Threat
 Lack of quality and durability of the
products.
 Imitable business model that can create
a problem for IKEA to continue its
 High competitiveness in the market.
 Strong and some draconian laws of the
government.
 Market fluctuation in Australia.

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uniqueness.
 Lack of product diversification.
 Lack of green products in display.
Conclusion
Based on the above discussion, it can be concluded that there are mixed scenario for
IKEA to establish its market extensively in Australia. The organisation has both the strengths
and weaknesses. However, the range of opportunities can help IKEA to foster its business
successfully. In this regard, making the product more attractive and using eco-friendly raw
materials are considered to be the most effective and customer centric approach that IKEA
should do in order to build a strong customer base. In other words, sustainability in the
Australian market can be generated in course of developing a unique and sustainable approach
for IKEA. Therefore, it can be concluded that the Pestle and five force analysis are helping to get
a close insights into the business situation of IKEA which is supplemented with a
recommendation. It will help the organisation to generate a strong brand image and market
capitalisation in Australia.
Recommendations
The organization, Ikea, might follow the recommended course of action with the objective of
winning over the competition that is faced by the same in Australia:
Expansion in the developing economies: The organization might take steps to expand to the
developing economies like India and China with the objective of minimizing the rate of
competition while increasing the scope of sales. The expansion of the organization in the

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developing economies will be based on the growing rate of disposable incomes and the changing
buying behavior of the customers (Ledin and Machin 2019). On the other hand, the expansion
would enable the organization in drawing the attention of the prospective buyers towards their
product offerings while increasing the sustenance of the venture. Therefore, the expansion in the
developing economies would be a proficient decision on the side of the organization for
maximizing the sales volume and increasing awareness among the customer groups.
Introducing new range of green products: The introduction of a new range of green products,
which are not developed through wood extracts would enable the organization in not only
stimulating its competitive edge in the existing economy but also assist the same in adhering to
the stringent environmental regulations (Chokshi 2018). The growing awareness for the green
products among the ethical consumers has affected the organizational capabilities of providing
them with the expected value proposition. Introduction of green products in the line of offerings
would enable the organization in improving the competitive position of the same in the markets.
Improving the business model: The improvements in the business model would enable the
organization in restricting imitability of the same by the other organizations. The uniqueness of
the business model will be based on the efficiency of the operationalization needs and the value
of providing the customers with the best quality offerings. The improvements in the business
model would ensue h organization in retaining the trust and loyalty of the customers over the
propositions that are made by the same.
Quality management operations: The organization might take significant steps to monitor over
the quality of the offerings that are being proposed by the same while operating in the different