SWOT Analysis
Strengths
Ikea is a business leader in terms of sales of products and services within the UK market and across Europe, which translates into a strong and stable market presence for its furniture and home appliances. Ikea offers very attractive customer care, discounts, and price-friendly products and services as part of the competitive advantage strategy. The company has multiple products and services as part of portfolio balance to minimise the effects of market swings in one sector of business. Ikea has been in operations for more than five decades, from the year 1943 (Ikea 2016). Thus, strong brand image and knowledge of the market is a plus for its business activities as illustrated in appendix 1.
Weakness
Due to the existence of several alternatives existing in the market, Ikea has become a victim of high brand bargaining power since product switching is very easy, especially for the ready-to-assemble-furniture brand. Besides, the company is not effectively rolling out its franchise and vertical integration strategies (Ikea 2016).
Opportunities
The company’s strong brand image can be used to roll out new products in the UK market and beyond. The company might also diversify the current products to appeal to more customer segments through simple adjustments on design and functionality. The company also has the opportunity to improve on its current marketing strategies since it generates a lot of revenues (Ikea 2016).
Threats
Stiff competition from companies such as Argos is threatening the current gains the company has made in the market as indicated in appendix 2.
7S by McKinsey
The main elements of 7S as proposed by McKinsey are strategy, structure, systems, shared values, skills, style, and staff as summarised in Appendix 3. Ikea has balanced these aspects and they are currently positively skewed towards the growth strategies in product development within the UK market.
Value Chain
Ikea is strategic and responsive to the needs of its customers through product distribution, along with the customer centricity business model. For instance, the current model for managing the supply chain at Ikea assumes the linear strategy where different products are distributed based on need and targeted market. The current supply chain is also dynamic to changes in the market through the integration of different distributors and agents across the UK and Europe markets, as part of the business functionality (Dagnino & Rocco 2009).
Balanced Score Card
Since Ikea operate within a competitive market in the UK and other parts of the globe, the company has series of success factors such as innovation, financial standing, effective customer management, and efficient internal business process (Cheverton 2011). Specifically, Ikea’s retail business model has been effective in aligning its business objectives with the underlying factors that influence business sustainability as summarized in appendices 4, 5, 6, and 7.
Porter’s Diamond Analysis
Factor Conditions
Ikea has a very strong financial arm that has guaranteed sustainable investment in product differentiation (Cone 2011). The company also has a diverse portfolio in the form of home appliances, accessories, and furniture besides the highly skilled labour force.
Demand Conditions
The company’s products are used daily by clients, especially home accessories and appliances. This makes the demand for Ikea products high within the global markets, especially within the company’s furniture brand (Cone 2011).
Related Industries
Ikea has formulated a series of business partnerships with other firms such as the Simsbury, TML, and DHL as a strategy for sustaining its foreign markets. Also, the company has franchised some of the appliances brands as an expansion strategy to gain competitive advantage (Kluger 2011).
Strategy, Structure, and Rivalry
Ikea’s brands such as flat-pack houses, CIGS solar panels, Medium-Density Fibreboard technology in furniture, and DUKTIG toy line are very innovative. These brands have created a sustainable and proactive business environment for the company in the UK and across the globe (Ikea 2016).
Accounting
Ikea’s financial standing has been stable for the last decade. The total sale for the 2015 financial year was recorded at $35.7 billion, which is 11.2% higher than the previous year. The total assets also grew from $340 billion in the year 2009 to $423 billion by the end of the 2015 financial year. The liabilities of Ikea rose from $961.82 million in 2013 to $1,242.50 million by the end of the 2015 financial year. Considering the positive performance, Ikea is in a position to sustain growth and business in the foreseeable future.
Resource Audit
Ikea has strategies and channels in place to guarantee optimal resource utilization for maximum productivity. The current production culture embodies efficiency through value maintenance, soft skills, and proper balance between the long-term and short-term resource utilization.
Cultural Paradigm
The physical work environment at Ikea encourages effectiveness in employee performance since there are a series of structured congenial and motivational attributes. These structures promote comfort, convenience, job security, and career growth. At present, Ikea is among the top ten global brands with the happiest workforce. The company has systems to guarantee stable work conditions, welfare support, and teamwork.
Recommendations
Based on the challenge competition and high brand bargaining power as identified in the above analysis, Ikea should consider the introduction of competitive pricing, multiple product development, and unique market targeting to increase its competitive advantage currently enjoyed by Ikea, especially in the furniture brand (Kotler & Keller 2012). This is in line with the cognitive strategy proposed by Mintzberg, which proposes that marketers should embrace an exceedingly organized and expansive separation system in planning market division approaches (Witcher & Chau 2010).
This approach is instrumental in setting up the broadest conceivable instrument for product positioning to improve profits for particular elements, which make the item exceptional and engaging target customers (Robbins, Millicent, & Jones 2010). Besides, Ikea should reduce the effects of high brand bargaining power through the creation of multiple products from a single product to an environment of self-competition, especially in the home appliances and accessories brand (Eugene & Michael 2009; Robbins, Millicent, & Jones 2010). This strategy will create an environment of own competition besides increasing benefits from economies of scale.
Reference List
Cheverton, P 2011, Key marketing skills: strategies, tools, and techniques for marketing success, Kogan Page, London.
Cone, S 2011, Steal these ideas: Marketing secrets that will make you a star, John Wiley & Sons, New York.
Dagnino, G & Rocco, E 2009, Competition strategy: theory, experiments, and cases, Rutledge, New York.
Eugene, F & Michael, C 2009, Financial management theory and practice, South-Western Cengage Learning, USA.
Ikea 2016, The Ikea concept. Web.
Kotler, P & Keller, K 2012, Marketing management, Pearson Prentice Hall, New Jersey.
Robbins, T, Millicent, B & Jones, M 2010, OB: The essentials, Pearson, Melbourne.