IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A)

Traces the history of IKEA's response to a TV report that its Indian carpet suppliers were using child labor. Describes IKEA's growth, including the importance of a sourcing strategy based on its close relationships with suppliers in developing countries. Details the development of IKEA's strong culture and values that include a commitment "to create a better everyday life for many people." Describes how, in response to regulatory and public pressure, IKEA developed a set of environmental policies that grew to encompass a relationship with Greenpeace and WWF on forest management and conservation. Then, in 1994, Marianne Barner, a newly appointed IKEA product manager, is surprised by a Swedish television documentary on the use of child labor by Indian carpet suppliers, including some that supply IKEA's rugs. She immediately implements a strict policy that provides for contract cancellation if any IKEA supplier uses child labor. Then Barner is confronted by a German TV producer who advises her that he is about to broadcast an investigative program documenting the use of child labor in one of the company's major suppliers. How should she react to the crisis? How should the company deal with the ongoing issue of child labor in the supply chain?

Authors :: Christopher A. Bartlett, Vincent Dessain, Anders Sjoman

Topics :: Technology & Operations

Tags :: Cross-cultural management, Emerging markets, Ethics, Growth strategy, Human resource management, Operations management, Public relations, Social enterprise, Social responsibility, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A)" written by Christopher A. Bartlett, Vincent Dessain, Anders Sjoman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea's Child facing as an external strategic factors. Some of the topics covered in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) case study are - Strategic Management Strategies, Cross-cultural management, Emerging markets, Ethics, Growth strategy, Human resource management, Operations management, Public relations, Social enterprise, Social responsibility and Technology & Operations.

Some of the macro environment factors that can be used to understand the IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing commodity prices, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A)

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea's Child, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea's Child 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) can be done for the following purposes –
1. Strategic planning using facts provided in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) case study
2. Improving business portfolio management of Ikea's Child
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea's Child

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Strengths IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Ikea's Child in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) Harvard Business Review case study are -

Diverse revenue streams

– Ikea's Child is present in almost all the verticals within the industry. This has provided firm in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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.

High switching costs

– The high switching costs that Ikea's Child 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.

Ability to lead change in Technology & Operations field

– Ikea's Child 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 Child in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– Ikea's Child has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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.

Strong track record of project management

– Ikea's Child is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– Ikea's Child has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea's Child 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.

Organizational Resilience of Ikea's Child

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea's Child does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Cross disciplinary teams

– Horizontal connected teams at the Ikea's Child 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.

Low bargaining power of suppliers

– Suppliers of Ikea's Child in the sector have low bargaining power. IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ikea's Child to manage not only supply disruptions but also source products at highly competitive prices.

Digital Transformation in Technology & Operations segment

- digital transformation varies from industry to industry. For Ikea's Child digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ikea's Child 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.

Operational resilience

– The operational resilience strategy in the IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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.

Ability to recruit top talent

– Ikea's Child is one of the leading recruiters in the industry. Managers in the IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.

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Weaknesses IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) are -

Slow to strategic competitive environment developments

– As IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) HBR case study mentions - Ikea's Child 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 Child is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Ikea's Child needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ikea's Child to focus more on services rather than just following the product oriented approach.

High bargaining power of channel partners

– Because of the regulatory requirements, Christopher A. Bartlett, Vincent Dessain, Anders Sjoman suggests that, Ikea's Child 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.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A), is just above the industry average. Ikea's Child 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.

Interest costs

– Compare to the competition, Ikea's Child 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.

Need for greater diversity

– Ikea's Child has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Ability to respond to the competition

– As the decision making is very deliberative, highlighted in the case study IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A), in the dynamic environment Ikea's Child has struggled to respond to the nimble upstart competition. Ikea's Child has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High cash cycle compare to competitors

Ikea's Child 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.

Skills based hiring

– The stress on hiring functional specialists at Ikea's Child has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Low market penetration in new markets

– Outside its home market of Ikea's Child, firm in the HBR case study IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Lack of clear differentiation of Ikea's Child products

– To increase the profitability and margins on the products, Ikea's Child needs to provide more differentiated products than what it is currently offering in the marketplace.

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Opportunities IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) | 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) are -

Loyalty marketing

– Ikea's Child 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.

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 Child can use these opportunities to build new business models that can help the communities that Ikea's Child operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.

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 Child 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.

Leveraging digital technologies

– Ikea's Child 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.

Developing new processes and practices

– Ikea's Child can develop new processes and procedures in Technology & Operations 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.

Changes in consumer behavior post Covid-19

– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea's Child 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 Child 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.

Learning at scale

– Online learning technologies has now opened space for Ikea's Child 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.

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 Child in the consumer business. Now Ikea's Child can target international markets with far fewer capital restrictions requirements than the existing system.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea's Child can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Low interest rates

– Even though inflation is raising its head in most developed economies, Ikea's Child can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Ikea's Child is facing challenges because of the dominance of functional experts in the organization. IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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.

Better consumer reach

– The expansion of the 5G network will help Ikea's Child to increase its market reach. Ikea's Child 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.

Using analytics as competitive advantage

– Ikea's Child has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ikea's Child to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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Threats IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) are -

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.

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 Child.

High dependence on third party suppliers

– Ikea's Child 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.

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 Child needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.

Easy access to finance

– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea's Child can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Shortening product life cycle

– it is one of the major threat that Ikea's Child is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

Increasing wage structure of Ikea's Child

– 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's Child.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Ikea's Child 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) .

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 Child business can come under increasing regulations regarding data privacy, data security, etc.

Technology acceleration in Forth Industrial Revolution

– Ikea's Child has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Ikea's Child needs to keep up with the evolution of technology in the Technology & Operations 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Ikea's Child in the Technology & Operations industry. The Technology & Operations 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.

Stagnating economy with rate increase

– Ikea's Child 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.

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Weighted SWOT Analysis of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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's Global Sourcing Challenge: Indian Rugs and Child Labor (A) 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 Child needs to make to build a sustainable competitive advantage.

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