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Abstract
Ikea Timeline
Vision & Mission
Organization structure
Business Strategy
SWOT analysis
Value Chain analysis
VRIO analysis
Resource Based view
Internal factor analysis - IFAS
PEST analysis
Porters 5 forces industry
analysis
Porters Diamond Model
External Factor Analysis EFAS
BCG Matrix
Ans Off Matrix
Market Share
Conclusion

IIFT BUSINESS STRATEGY TERM

PAPER
Presented by group 2
Name
Roll no
Harikrishna Boosru
8A
Neerav Doshi
15A
Oblesh
16A

ABSTRACT

IKEA is a multinational group of companies that designs and sells ready-to-assemble

furniture appliances and home accessories. As of January 2008, it is the world's largest
furniture retailer. Founded in Sweden in 1943 by then-17-year-old Ingvar Kamprad, who
was listed as one of the world's richest people in 2013, the company's name is an
acronym that consists of the initials of Ingvar Kamprad, Elmtaryd (the farm where he
grew up), and Agunnaryd (his hometown in Smland, southern Sweden). The company is
known for its modern architectural designs for various types of appliances and furniture,
and its interior design work is often associated with an eco-friendly simplicity. In
addition, the firm is known for its attention to cost control, operational details, and
continuous product development, corporate attributes that allowed IKEA to lower its
prices by an average of two to three percent over the decade to 2010 during a period of
global expansion.
As of March 2016, IKEA owns and operates 384 stores in 48 countries. In fiscal year
2010, US$23.1 billion worth of goods were sold, a total that represented a 7.7 percent
increase over 2009. The IKEA website contains about 12,000 products and is the closest
representation of the entire IKEA range. There were over 470 million visitors to IKEA's
websites in the year from September 2007 to September 2008. The company is
responsible for approximately 1% of world commercial-product wood consumption,
making it one of the largest users of wood in the retail sector.

VISION & MISSION

Vision
IKEA vision statement is
"To create a better everyday life for the many people."

Mission
IKEA mission statement is "To offer 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."

Market positioning
IKEA market positioning statement is "Your partner in better living. We do
our part, you do yours. Together we save money.

Objectives of IKEA

To produce affordable product for their customers.

Better life for those who can't afford expensive products.
Ensure the customer finds what they are looking for in store at low prices.
IKEA has an original approach to deal with customers: it employs the self-serving
method.

Core competence
Customers chose their products, take them out of the shelves and assemble them
at home on their own. Although this approach is quite unusual in the furniture
business the customers are willing to do that because of the low prices, the easy to

Organization structure

Business Strategy
Low-cost modular ready to assemble furniture
Get it delivered for a fee or by yourself
Employees are trained to save electricity
Fly in economy class
Take buses instead of taxis
Expensive wood is used only on top visible layers of the furniture
Suppliers are chosen from a pool of 1800 to maintain cost leadership

Segmentation
Middle-class population, All age group.
Advanced Economies Europe, USA, Australia
Emerging Markets China
Positioning
Cost Leadership
Differentiation

SWOT

POSITIVE INFLUENCES
STRENGTHS

INTERNAL EXAM

Untapped markets like middle east and Asian

countries
Better advertisements
Demand for greener and environment friendly
products
Different type of stores such as outlets or
high-end labels.
Increase online sales and Internet presence.
Use the popularity among young people to
expand to college markets.
Existing stores are few and large, new stores
could be many and smaller.

WEAKNESSES

Assembly of furniture
Yet to invade upcoming global markets
Misperception of quality, products dont
last long
Product dimensions unsuitable for global
markets
Advertisements in the form of catalogues
mostly
Weak online support
Locations inaccessible & inconvenient

THREATS
Indirect threats from Wal-Mart, home depot, pier.
The global economic crisis.
Social trends such as the slowdown in first time
buyers entering the housing market. This is a core
market segment for IKEA products.
Market forces more competitors entering the
low price household and furnishings markets.
IKEA needs to reinforce its unique qualities to
compete with these.
Economic factors the recession slows down
consumer spending and disposable income
reduces.

NEGATIVE INFLUENCES

EXTERNAL EXAM

Wide range of products and styles

Low cost structure by economies of scale
High differentiation with competitors
One stop shop for furniture needs with DIY
approach
Easy shipping and transportation
Eco friendly and recycling of products
Functional design of products
Appealing shopping experience
Corporate culture
Brand image

OPPORTUNITIES

VALUE CHAIN ANALYSIS

FIRM
INFRASTRUCTUR
E
HUMAN
RESOURCE
MANAGEMENT

Hierarchical organizational structure.

Large scale stores in size.
High level of commitment to HR practices
Effective staff training and development programs

Research and development activities initiated in Sweden.

Extensive use of information technologies in various business processes and research
and development
No need for raw materials as IKEA does not produce own brand products
PROCUREMENT
MARKETING &
INBOUND Long strategic relationships with all suppliers
TECHNOLOGY
DEVELOPMENT

LOGISTICS

For IKEA is associated with

purchasing raw materials
from 1002 suppliers
located in 51 countries
globally and relationships
with supplier are
maintained around the
world. IKEAs supply chain
management is one of its
solid sources of
competitive advantage.
Each IKEA store is massive
and has more than 9,500
product range and about
20-25% of employees in
each store deal with
logistics DIY assembly
principle for many IKEA
products lowers the cost
of packaging and makes
inbound logistics easier to
Since
products
facilitateIKEA
..

OPERATIONS
There are 315 IKEA
Group stores located
in 27 countries and
IKEA Group operates
in more than 40
countries globally.
59% of
manufacturing takes
place in Europe. The
table below,
illustrates the
numbers of stores,
purchasing value, the
numbers of
distribution centers
and production units
in each region the
company operates.

OUTBOUND
LOGISTICS

SALES

IKEA relies in its

catalogues extensively
Customers are
for marketing and sales,
responsible for costs
as more than 200
associated with the
million catalogues are
transportation of goods
printed each year
purchased stores. The
globally. Online sales
company offers two types
channel is also
of delivery services.
Parcel delivery is a
extensively utilized by
service to delivery small
the company and IKEA
items weighting up to
catalogue app was
25kg and the company
opened 46 million times
charges around USD 12
during FY2014.
depending on the
Additionally, IKEA uses
location of the specific
print and media
store. Truck delivery, on
advertising, sales
the other hand, The
promotion, events and
delivery for goods
experiences, public
purchased online is done
relations and direct
free of charge.
marketing
techniques
in
prices, we can imply that
IKEA has
adapted
an integrated manner.

SERVICES
one of the primary
activities in the value
chain is addressed by
IKEA via a standard
set of techniques and
practices such as the
provision of online
and telephone
customer services,
offering refunds and
exchanges of goods
whenever relevant
and encouraging
customers to provide
feedback.

are based on the low

THE LOW COSTLEADERSHIP STRATEGY as a competitive advantage.
Starting with the Primary Activities, inbound logistics; IKEA has large shipments and massive warehouse
to product their products. Operation runs in various countries. In procurement; IKEA purchases from
numerous sources having a strong bargaining power with suppliers. Technological development; learning
and experienced amortized over large volume. Human resource management; providing intensive
training to emphasize cost savings means and firm infrastructure; having to centralized cost controls.

VRIO ANALYSIS

Resource Based View

PHYSICAL ASSETS

OWN 313 STORES WOLDWIDE AND ARE USUALLY LOCATED

OUTSIDE THE TOWN
37 STORES THAT ARE FRANCHISED
38 COUNTRIES
WORLD LARGEST FURNITURE RETAILER

FINANCIAL ASSETS

PROMOTION AND ADVERTISING

SOURCE FROM FRANCHISE
EXPERIENCED A 15% SALES INCREASE BETWEEN 1990-2005
2005 THEY MADE 14.8 BILLION EURO
2010 THEY EXTIMATED $23 BILLION

INTELLECTUAL
RESOURCE

GOOD RELATIONSHIP WITH GOVERNMENT

SKILLED STAFFS
UNIQUE FURNITURE STYLING
OPERATE 24 HOURS DAILY
GOOD RELATIONSHIP WITH SUPPLIERS
BUILDING STRUCTUER

REPUTION RESOURCE

BRAND NAME
FRANCHISING
$128 MILLION FOR UNICEF IN 2015
WELL KNOWN IN EUROPE ASIA AND AMERICA

HUMAN RESOURCE

127,000 STAFFS
SKILLED EMPLOYEES IN STORES AND WOODS
GOOD TRANSPORT SYSTEM
EXPERT DESIGNERS
GOOD CUSTOMER SERVICE
OVER 12,000 ITEMS PRESENT IN THE WEB
MOTIVATION OF EMPLOYEES (REWARD SYSTEM)

RELATIONAL RESOURCE

28 DISTRIBUTION CENTER
GOOD INTERNET ACCESS
NETWORKING SYSYTEM
550 MILLION PEOPLE USING THEIR WEBSITE EVERY YEAR
GOOD TRANSPORT SYSTEM

10

IKEA-Internal Factor Analysis Summery (IFAS)

11

PEST ANALYSIS
IKEA revenues is subject to
POLITICAL
political
situation in the
market and a wide range of
political factors such as
government attitude
towards the brand and
political stability.
The company has been
involved in a series of
issues on political grounds.
In 2012, IKEA had to admit
that the company used
prison labor in East
Germany in 1970s and
1980s to produce its
products. Although IKEA
offered formal public
apology to those affected,
the incident caused a
significant political
controversy around the
globe. Moreover,
allegations that IKEA
founder Ingvar Kamprad
was an active recruiter for
Swedish Nazi group has
sparked controversy with
negative effects on the
brand image.
IKEA can enter the markets
of emerging companies
through joint ventures or
partnerships to explore
these new markets.
however, the company has
to be wary of protectionist
policies of many host
countries it operates in
since there is a real risk
that countries may impose
high tariffs on goods
imported in an attempt to

Macroeconomic situation and

consumer spending power is one
ECONOMICAL
of the most significant economic
factors that effects IKEA
performance, as well as, the
performance of any business
entity. The global economic and
financial crisis of 2007 2009 is
a stark example for the impact of
external economic factor for
businesses. However, it is
important to note that the
negative impact of the crisis was
at a lesser extent for IKEA
compared to many other
businesses due to the cost
leadership strategy of the
business. Specifically, although
IKEA had to eliminate 5,000 jobs,
the volume of sales dropped only
by 1% by the second quarter of
2009.
Moreover, IKEA revenues are
directly affected by exchange
rate fluctuations between EUR
and USD and other major
currencies due to the global
scale of business operations.
Fluctuations of costs of raw
materials IKEA uses is a major
economic factor that also
impacts the business
significantly.
. This will have an impact on the
margins of the organization and
might lead to passing over the
cost to consumers by increasing
prices of most things in the
supermarket. Furthermore,
fluctuating commodity and raw
material prices leading to an
overall situation of increasing
prices, resulting in decreased
competitiveness. The credit
crunch can impact IKEA
negatively as it might decrease
the purchasing power of

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SOCIAL

TECHNOLOGICAL

Increasing concern towards

environmental issues in the
society fueled by the media
is a noteworthy social
tendency that threatens
IKEAs long-term growth
prospects. Specifically,
people are becoming
increasingly concerned about
the issues of deforestation,
water depletion, global
warming and others. IKEA is
the worlds third largest
consumer of wood[ and this
fact may damage the brand
image due to the social
change associated with
concern towards
environmental problems
As Ikea forays into the lesser
tap markets of China and
India, social factors may also
come into play. Asian
societies are generally more
savers than spenders and in
such economic certainty;
Asian consumers may be
unwilling to spend on new
furniture, preferring to save
for a rainy day. At the same
time, the more affluent
consumers who are able to
spend may be unwilling to
buy products from Ikea which
has a reputation of requiring
self-assembly.

IKEA has embraced technology

as a business tool. It has an up
to date website from which
customers can view online
catalogues, check for stock
availability before going to the
store, order online and even
correspond with the customer
service team. As technology
evolves, IKEA will perpetually
keep on updating and
upgrading its technology to
keep pace with its global
networks ranging from network
relationships with supplier to
those with distributors

PORTERS 5 FORCES

13

Bargaining power of Ikea

Threat of new entrants

The threat of new entrants
into the industry is low, and
the chances of emergence of
new competition for IKEA is
insubstantial as the current
market is saturated and
significant amount of
financial investments and
expertise are required to
become a discounted
furniture retailer in a global
scale.
Threat of substitute

The threat of substitute

products and services is low
as there are no too many
products and services
available that can substitute
the demand for furniture,
home appliances and a range
of other products offered by
IKEA.

Bargainin
g power
of buyer

Threat of
new
entrants

Rivalry
amongst
existing
firms
Threat of
substitut
e

Bargaini
ng power
of
supplier

Rivalry among existing firms is

intense in the global market of
discount furniture and the
major players in the industry
include Euromarket Designs
Inc, Galiform plc, Wal-Mart
Stores Inc, Argos and others.
However, currently IKEA is the
undisputed market leader in
the industry of discounted
furniture in the global scale.

The bargaining power of

IKEA customers is strong, as
the competition is intense
and the customers have a
wide choice of alternative
options offered by global
furniture retailers, as well as,
local furniture producers.

Bargaining power of
supplier
IKEA suppliers
do not
possess substantial
bargaining power as there
are numerous factories
around the globe with the
capabilities and resources to
form partnership with IKEA.
At the same time, IKEA
pursues the strategy of
forming strategic long-term
relationships with its
suppliers.

PORTERS DIAMOND MODEL

Suppliers

FIRM STRATEGY,
STRUCTURE &
RIVALRY

Technology

14

Low cost low price

strategy
Low bureaucracy
Rivalries:
British B&Q
Germany
DEMAND
CONDITIONS

FACTOR
CONDITIONS

Labour force: low cost

Population: 1.3 billion

Infrastructure:
poor => good

The raising of Middle class

Government policy

SUPPORTING
INDUSTRIES

(Porter,
1990)

Cheap furniture demand

IKEA-EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS)

15

BCG Matrix for IKEA

Textile products were investigated to be an example for

BCG Matrix:

Ikeas Textile products are question mark on BCG Matrix

because of the strong rivals like Linens etc.

Decision is investing to make them a star.

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ANSOFF GROWTH MATRIX

IKEA uses market

penetration strategy for its
current products.
By the decision of selling
food and opening
restaurants inside the store
they used conglomerate
diversification.
By entering Turkish Market
Ikea used Market
Development Strategy.

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MARKET SHARE

18

Market Share in 4 largest markets by sales

First in Germany with 23%
Eleventh in US furniture market (not including housewares) with 3%
First in France 26 stores with 16.3% vs Conforama 180 stores with 14%
Second in UK with 6.1% vs Argos with 6.4%

Market share in new emerging markets

First in fast growing China market with 43% of housewares market

Pricing

IKEA pricing strategy is to maintain good quality and design while keeping cost as low as possible.
10 keys to IKEAs low pricing
1. Recycling
2.
3.
4.
5.

6. In-house design
AS-IS
7. Economies of scale
Waste Reduction
8. Transportation
Automatic Selling
9. Strategic Placement
Thriftiness
10. Minimal Packaging

CONCLUSION

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IKEA is a well-known global brand with hundreds of stores across the world. In order to
improve performance, it must assess its external and competitive environment. This
will reveal
the key opportunities it can take advantage of and the threats it must deal with. IKEA
responds to both internal and external issues in a proactive and dynamic manner by
using its
strengths and reducing its weaknesses. Through this, IKEA is able to generate the
strong
growth it needs to retain a strong identity in the market.
IKEAs passion combines design, low prices, economical use of resources, and
responsibility for
people and the environment. The companys products, processes and systems all
demonstrate its
environmental stance. For example, clever use of packaging and design means more
items can fit
into a crate, which means fewer delivery journeys. This in turn reduces IKEAs carbon
footprint.
IKEA believes that there is no compromise between doing good business and being a
good
business. It aims to go beyond profitability and reputation. IKEA is intent on becoming a
leading example in developing a sustainable business. This will create a better
everyday life
for its customers. IKEA has discovered a business truth being sustainable and
responsible is

THANK YOU

20

Q&A