How IKEA's Strategy Was Formed SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of How IKEA's Strategy Was Formed
This case describes how IKEA's distinctive strategy was formed over a period of about 30 years (late 1940s to late 1970s). It describes how the various elements of its strategy were created gradually, with the help of many people other than the founder Kamprad, and how these elements were ultimately integrated with each other thanks to the creation of IKEA's organizational culture that came much later.
Swot Analysis of "How IKEA's Strategy Was Formed" written by Quy Huy, Michael Jarrett, Lisa Duke includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea's Formed facing as an external strategic factors. Some of the topics covered in How IKEA's Strategy Was Formed case study are - Strategic Management Strategies, Competitive strategy, International business, Leadership, Organizational culture and Strategy & Execution.
Some of the macro environment factors that can be used to understand the How IKEA's Strategy Was Formed casestudy better are - – central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , there is backlash against globalization, etc
Introduction to SWOT Analysis of How IKEA's Strategy Was Formed
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in How IKEA's Strategy Was Formed case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea's Formed, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea's Formed 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 How IKEA's Strategy Was Formed can be done for the following purposes –
1. Strategic planning using facts provided in How IKEA's Strategy Was Formed case study
2. Improving business portfolio management of Ikea's Formed
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea's Formed
Strengths How IKEA's Strategy Was Formed | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea's Formed in How IKEA's Strategy Was Formed Harvard Business Review case study are -
Successful track record of launching new products
– Ikea's Formed has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea's Formed 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.
Analytics focus
– Ikea's Formed 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 Quy Huy, Michael Jarrett, Lisa Duke 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.
Organizational Resilience of Ikea's Formed
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea's Formed does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Ikea's Formed is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ikea's Formed is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in How IKEA's Strategy Was Formed Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Ikea's Formed has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Ikea's Formed has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in How IKEA's Strategy Was Formed Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Strategy & Execution field
– Ikea's Formed 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's Formed in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Ikea's Formed in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Ikea's Formed is one of the most innovative firm in sector. Manager in How IKEA's Strategy Was Formed Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Ikea's Formed digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ikea's Formed 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.
Effective Research and Development (R&D)
– Ikea's Formed has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study How IKEA's Strategy Was Formed - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Ikea's Formed is one of the leading recruiters in the industry. Managers in the How IKEA's Strategy Was Formed are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses How IKEA's Strategy Was Formed | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of How IKEA's Strategy Was Formed are -
Slow to strategic competitive environment developments
– As How IKEA's Strategy Was Formed HBR case study mentions - Ikea's Formed takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Ikea's Formed, firm in the HBR case study How IKEA's Strategy Was Formed needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the How IKEA's Strategy Was Formed HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Ikea's Formed has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Quy Huy, Michael Jarrett, Lisa Duke suggests that, Ikea's Formed 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ikea's Formed is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study How IKEA's Strategy Was Formed can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study How IKEA's Strategy Was Formed 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's Formed 's lucrative customers.
High cash cycle compare to competitors
Ikea's Formed 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.
Capital Spending Reduction
– Even during the low interest decade, Ikea's Formed 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.
Interest costs
– Compare to the competition, Ikea's Formed 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Ikea's Formed needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study How IKEA's Strategy Was Formed, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities How IKEA's Strategy Was Formed | 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 How IKEA's Strategy Was Formed are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ikea's Formed in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ikea's Formed is facing challenges because of the dominance of functional experts in the organization. How IKEA's Strategy Was Formed case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Ikea's Formed can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ikea's Formed can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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's Formed 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.
Learning at scale
– Online learning technologies has now opened space for Ikea's Formed 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.
Creating value in data economy
– The success of analytics program of Ikea's Formed has opened avenues for new revenue streams for the organization in the industry. This can help Ikea's Formed to build a more holistic ecosystem as suggested in the How IKEA's Strategy Was Formed case study. Ikea's Formed can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Ikea's Formed 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Ikea's Formed can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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's Formed can use these opportunities to build new business models that can help the communities that Ikea's Formed operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Better consumer reach
– The expansion of the 5G network will help Ikea's Formed to increase its market reach. Ikea's Formed 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.
Buying journey improvements
– Ikea's Formed can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. How IKEA's Strategy Was Formed suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ikea's Formed in the consumer business. Now Ikea's Formed can target international markets with far fewer capital restrictions requirements than the existing system.
Threats How IKEA's Strategy Was Formed External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study How IKEA's Strategy Was Formed are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ikea's Formed in the Strategy & Execution industry. The Strategy & Execution 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.
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's Formed.
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's Formed in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Ikea's Formed 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 Strategy & Execution industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Ikea's Formed has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Ikea's Formed needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Ikea's Formed high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea's Formed can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study How IKEA's Strategy Was Formed, Ikea's Formed may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Stagnating economy with rate increase
– Ikea's Formed can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ikea's Formed 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's Formed 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Ikea's Formed business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of How IKEA's Strategy Was Formed 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 How IKEA's Strategy Was Formed 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 How IKEA's Strategy Was Formed 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 How IKEA's Strategy Was Formed 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 How IKEA's Strategy Was Formed 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's Formed needs to make to build a sustainable competitive advantage.