IKEA Furniture Industry Company: Competitive Power

IKEA is a famous company that operates in the retail and furniture industries. The company provides affordable products to its customers that are often praised for their practicality, design, and recognizability of the brand. The paper aims to analyze IKEA’s competitive positioning in the furniture industry by using SWOT analysis, marketing mix (4 Ps), and Porter’s Five Forces analysis.

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Marketing Mix

Product. IKEA’s products are affordable and low-priced, as well as quality and with a different warranty. IKEA provides an extensive range of products to customers and keeps the prices low. It is possible because the company designs, produces, distributes, and sells the products or ensures that manufacture prices are low and do not impact the price, thus attracting more customers and increasing the company’s value. It supports the DIY concept but provides technical assistance for customers if necessary, which is not present among other competitors.

Price. IKEA’s products are affordable due to several reasons. First, it purchases products in bulks from outside manufacturers. Second, it has its manufacturers that work under the IKEA Industry brand that is present in six continents and more than 30 cities (Inter IKEA Group). Third, it offers credit options for customers.

Place. The company is present in more than 36 countries, where it either owns or operates 296 stores (IKEA). Its stores are usually located in the suburbs, where they cannot attract as many customers as in the city, but the cost of stores (renting or purchasing) is lower. Some stores have restaurants and food shops that also attract customers and provide additional revenues for the company.

Promotion. The company’s recognizability is high because its products have a unique minimalistic Scandinavian style (Gummesson and Grönroos 480). The brand’s blue-yellow logo resembling the colors of the Swedish flag is also famous. IKEA uses different ways of advertising, including TV advertising, newspaper and magazine advertising, online marketing, etc. Some of IKEA’s advertisements are labeled as controversial, although the company actively reacts to that (Moran).

SWOT Analysis

Strengths. The brand is supported and recognized across the world. Low-cost affordable products attract hundreds of customers. The well-defined business strategy of the company allows it to target customers precisely and translate the company’s vision and mission. The company’s control of manufacturing and designing processes enables it to reduce the cost of products and increase profitability.

Weaknesses. Due to the presence in a variety of countries, it is difficult for the company to control the standards of manufacturing across its regional facilities. These difficulties also cause decreased safety and durability of products. Products’ recalls affecting not only the company’s revenues but also have a negative influence on the brand image (Xinhua).

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Opportunities. The company can emphasize the environmental friendliness of its products, attracting stakeholders who find sustainable furniture valuable. It will not only positively influence the company’s image but also increase products’ value from the customer’s perspective. The company can continue its expansion in emerging markets and developing countries where no similar players in the industry are present (e.g., China or India). IKEA is already present in China but if it can establish more manufacturing facilities in this country, it will not only attract more customers but also decrease the price of products.

Threats. Online commerce and e-commerce become more common as they demand less time and investment than offline retailing, attracting more customers. IKEA might not be able to compete with small local furniture manufacturers as it has to invest more in its stores located globally. Law regulations and possible decreasing quality of life/personal income can result in customers’ inability to purchase IKEA’s products.

Porter’s Five Forces

The threat of new entrants. The threat is low as new entrants need serious investments and expertise in the market to compete with IKEA. The majority of new entrants will be small players that do not have sufficient power to threaten IKEA’s positioning in the market.

The threat of substitutes. The threat is low because the company provides a unique range of products and services to customers that are rarely covered by other players. Brand image, its popularity, and support gained via efficient marketing also decreases the chance of success among substitutes. It is unlikely that substitutes’ wares will be more affordable than products sold by IKEA.

Bargaining power of customers. Due to relatively intense rivalry in the market, the power of customers is moderate. If IKEA’s products become less affordable, customers will switch to other competitors, thus affecting IKEA’s profit margin and leading to losses in it. The quality and safety of IKEA’s products are being frowned upon, and the company seems to be using double standards by recalling dangerous products from first-world markets (the USA, Canada) while avoiding the same step in other markets (China) (Xiaobo). Such an approach to different markets can result in a loss of loyalty and customers’ decision to switch to other competitors.

Bargaining power of suppliers. The power is low as there is a large number of suppliers available to IKEA in case if its current suppliers want to increase cost inputs. As IKEA is a famous brand present across the globe, suppliers are interested in establishing good relationships with it. IKEA is also interested in maintaining long-lasting relationships with suppliers as it places a high value on them.

Industry rivalry. The presence of various influential players such as Wal-Mart, Home Depot, Alibaba, as well as online retailers makes rivalry in the industry intense; if competitors can provide lower prices or attractive offers, IKEA’s market share can decrease significantly.

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Works Cited

Gummesson, Evert, and Christian Grönroos. “The Emergence of the New Service Marketing: Nordic School Perspectives.” Journal of Service Management, vol. 23, no. 4, 2012, pp. 479-497.

IKEA. “Newsroom.” IKEA, n.d., Web.

Inter IKEA Group. “IKEA Industry.” IKEA, Web.

Moran, Lee. “Ikea’s Sexist TV Ad Tells Women They Are Nothing without a Boyfriend.” Huffington Post, Web.

Xiaobo, Sun. “Safety Standards Reveal Double Standards by IKEA.” Global Times. 2017, Web.

Xinhua. “Shanghai Asks IKEA to Investigate Product Safety after US Recall.” China Daily. 2017, Web.

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