How IKEA's Strategy Was Formed SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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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 - – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , geopolitical disruptions, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, there is backlash against globalization,
challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
Diverse revenue streams
– Ikea's Formed is present in almost all the verticals within the industry. This has provided firm in How IKEA's Strategy Was Formed 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.
Highly skilled collaborators
– Ikea's Formed 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 How IKEA's Strategy Was Formed HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Ikea's Formed are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
High brand equity
– Ikea's Formed has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ikea's Formed to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
Operational resilience
– The operational resilience strategy in the How IKEA's Strategy Was Formed 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.
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 -
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.
Products dominated business model
– Even though Ikea's Formed 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 - How IKEA's Strategy Was Formed should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study How IKEA's Strategy Was Formed, is just above the industry average. Ikea's Formed needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study How IKEA's Strategy Was Formed, in the dynamic environment Ikea's Formed has struggled to respond to the nimble upstart competition. Ikea's Formed has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Ikea's Formed is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Ikea's Formed needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ikea's Formed to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study How IKEA's Strategy Was Formed 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 How IKEA's Strategy Was Formed can leverage the sales team experience to cultivate customer relationships as Ikea's Formed is planning to shift buying processes online.
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's Formed supply chain. Even after few cautionary changes mentioned in the HBR case study - How IKEA's Strategy Was Formed, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ikea's Formed vulnerable to further global disruptions in South East Asia.
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.
Slow decision making process
– As mentioned earlier in the report, Ikea's Formed 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's Formed 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.
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 -
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.
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.
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.
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.
Developing new processes and practices
– Ikea's Formed can develop new processes and procedures in Strategy & Execution 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ikea's Formed 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, How IKEA's Strategy Was Formed, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ikea's Formed to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Ikea's Formed to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea's Formed 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's Formed 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.
Building a culture of innovation
– managers at Ikea's Formed 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 Strategy & Execution segment.
Leveraging digital technologies
– Ikea's Formed 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea's Formed can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 -
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.
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.
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.
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.
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.
Consumer confidence and its impact on Ikea's Formed 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.
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.
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's Formed needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
Shortening product life cycle
– it is one of the major threat that Ikea's Formed is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ikea's Formed 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 How IKEA's Strategy Was Formed .
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.
