In 2002, the IKEA Group is the world's top furniture retailer, with 154 stores worldwide. In the United States, IKEA operates 14 stores, all of which have been enormously popular despite their self-service requirements. The company's goal is to have 50 stores in operation in the United States by 2013. Explores various options for managing this growth strategy.
Swot Analysis of "IKEA Invades America" written by Youngme Moon includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea Stores facing as an external strategic factors. Some of the topics covered in IKEA Invades America case study are - Strategic Management Strategies, Market research, Pricing, Product development and Sales & Marketing.
Some of the macro environment factors that can be used to understand the IKEA Invades America casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, geopolitical disruptions, technology disruption, challanges to central banks by blockchain based private currencies, increasing commodity prices, supply chains are disrupted by pandemic ,
digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of IKEA Invades America
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IKEA Invades America case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea Stores, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea Stores operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of IKEA Invades America can be done for the following purposes –
1. Strategic planning using facts provided in IKEA Invades America case study
2. Improving business portfolio management of Ikea Stores
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea Stores
Strengths IKEA Invades America | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea Stores in IKEA Invades America Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Ikea Stores in the sector have low bargaining power. IKEA Invades America has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ikea Stores to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Ikea Stores has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea Stores has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Sales & Marketing industry
– IKEA Invades America firm has clearly differentiated products in the market place. This has enabled Ikea Stores to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Ikea Stores to invest into research and development (R&D) and innovation.
Ability to lead change in Sales & Marketing field
– Ikea Stores is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ikea Stores in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Ikea Stores has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ikea Stores to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Ikea Stores digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ikea Stores has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Ikea Stores has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in IKEA Invades America HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Ikea Stores is one of the most innovative firm in sector. Manager in IKEA Invades America Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Ikea Stores
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea Stores does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Ikea Stores is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Youngme Moon can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the IKEA Invades America Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Diverse revenue streams
– Ikea Stores is present in almost all the verticals within the industry. This has provided firm in IKEA Invades America case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses IKEA Invades America | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IKEA Invades America are -
Capital Spending Reduction
– Even during the low interest decade, Ikea Stores has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Ikea Stores has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, Youngme Moon suggests that, Ikea Stores is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Ikea Stores supply chain. Even after few cautionary changes mentioned in the HBR case study - IKEA Invades America, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ikea Stores vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study IKEA Invades America, in the dynamic environment Ikea Stores has struggled to respond to the nimble upstart competition. Ikea Stores has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Ikea Stores has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - IKEA Invades America should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Ikea Stores is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Ikea Stores needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ikea Stores to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study IKEA Invades America that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case IKEA Invades America can leverage the sales team experience to cultivate customer relationships as Ikea Stores is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study IKEA Invades America has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ikea Stores 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Ikea Stores has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Ikea Stores even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Ikea Stores has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities IKEA Invades America | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study IKEA Invades America are -
Learning at scale
– Online learning technologies has now opened space for Ikea Stores to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Ikea Stores can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ikea Stores can use these opportunities to build new business models that can help the communities that Ikea Stores operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Loyalty marketing
– Ikea Stores has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ikea Stores can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, IKEA Invades America, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Ikea Stores can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Ikea Stores has opened avenues for new revenue streams for the organization in the industry. This can help Ikea Stores to build a more holistic ecosystem as suggested in the IKEA Invades America case study. Ikea Stores can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Ikea Stores can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Ikea Stores to increase its market reach. Ikea Stores will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Developing new processes and practices
– Ikea Stores can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea Stores can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea Stores can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ikea Stores can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ikea Stores to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Threats IKEA Invades America External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study IKEA Invades America are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Ikea Stores.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ikea Stores in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ikea Stores in the Sales & Marketing sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ikea Stores with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ikea Stores will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea Stores can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Ikea Stores needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Ikea Stores is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Ikea Stores needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ikea Stores can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study IKEA Invades America .
Increasing wage structure of Ikea Stores
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ikea Stores.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Ikea Stores demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of IKEA Invades America Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study IKEA Invades America needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study IKEA Invades America is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study IKEA Invades America is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of IKEA Invades America is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ikea Stores needs to make to build a sustainable competitive advantage.