Sustainability at IKEA Group: Video Supplement SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Sustainability at IKEA Group: Video Supplement
This video contains Q&A with IKEA Group's Chief Sustainability Officer Steve Howard and IKEA Group's Industrial Strategy Manager Per Berggren, the two primary case protagonists. They respond to student questions after the case was taught at an executive education class session at Harvard Business School.
Swot Analysis of "Sustainability at IKEA Group: Video Supplement" written by V. Kasturi Rangan, Michael W. Toffel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea Group's facing as an external strategic factors. Some of the topics covered in Sustainability at IKEA Group: Video Supplement case study are - Strategic Management Strategies, Strategy, Supply chain, Sustainability and Technology & Operations.
Some of the macro environment factors that can be used to understand the Sustainability at IKEA Group: Video Supplement casestudy better are - – wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Sustainability at IKEA Group: Video Supplement
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sustainability at IKEA Group: Video Supplement case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea Group's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea Group's 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 Sustainability at IKEA Group: Video Supplement can be done for the following purposes –
1. Strategic planning using facts provided in Sustainability at IKEA Group: Video Supplement case study
2. Improving business portfolio management of Ikea Group's
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 Group's
Strengths Sustainability at IKEA Group: Video Supplement | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea Group's in Sustainability at IKEA Group: Video Supplement Harvard Business Review case study are -
Ability to recruit top talent
– Ikea Group's is one of the leading recruiters in the industry. Managers in the Sustainability at IKEA Group: Video Supplement are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Ikea Group's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Ikea Group's is one of the most innovative firm in sector. Manager in Sustainability at IKEA Group: Video Supplement 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 Group's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea Group's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Ikea Group's is present in almost all the verticals within the industry. This has provided firm in Sustainability at IKEA Group: Video Supplement 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.
Learning organization
- Ikea Group's 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 Group's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sustainability at IKEA Group: Video Supplement Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Technology & Operations field
– Ikea Group's 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 Group's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Ikea Group's 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 V. Kasturi Rangan, Michael W. Toffel 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.
Cross disciplinary teams
– Horizontal connected teams at the Ikea Group's 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.
Highly skilled collaborators
– Ikea Group's 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 Sustainability at IKEA Group: Video Supplement HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Ikea Group's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sustainability at IKEA Group: Video Supplement 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.
High switching costs
– The high switching costs that Ikea Group's 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.
Weaknesses Sustainability at IKEA Group: Video Supplement | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sustainability at IKEA Group: Video Supplement are -
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 Group's supply chain. Even after few cautionary changes mentioned in the HBR case study - Sustainability at IKEA Group: Video Supplement, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ikea Group's vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Ikea Group's 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Sustainability at IKEA Group: Video Supplement, it seems that the employees of Ikea Group's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Sustainability at IKEA Group: Video Supplement 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 Sustainability at IKEA Group: Video Supplement can leverage the sales team experience to cultivate customer relationships as Ikea Group's is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sustainability at IKEA Group: Video Supplement, is just above the industry average. Ikea Group's 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.
No frontier risks strategy
– After analyzing the HBR case study Sustainability at IKEA Group: Video Supplement, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Capital Spending Reduction
– Even during the low interest decade, Ikea Group's 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 Group's 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Sustainability at IKEA Group: Video Supplement 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 Group's has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Ikea Group's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Sustainability at IKEA Group: Video Supplement, in the dynamic environment Ikea Group's has struggled to respond to the nimble upstart competition. Ikea Group's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Sustainability at IKEA Group: Video Supplement | 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 Sustainability at IKEA Group: Video Supplement are -
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 Group's 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 Group's 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.
Loyalty marketing
– Ikea Group's 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.
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 Group's in the consumer business. Now Ikea Group's can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ikea Group's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Ikea Group's has opened avenues for new revenue streams for the organization in the industry. This can help Ikea Group's to build a more holistic ecosystem as suggested in the Sustainability at IKEA Group: Video Supplement case study. Ikea Group's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ikea Group's 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, Sustainability at IKEA Group: Video Supplement, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Ikea Group's 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 Technology & Operations segment.
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 Group's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Ikea Group's 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.
Better consumer reach
– The expansion of the 5G network will help Ikea Group's to increase its market reach. Ikea Group's 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea Group's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Ikea Group's 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ikea Group's 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.
Threats Sustainability at IKEA Group: Video Supplement External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sustainability at IKEA Group: Video Supplement are -
Environmental challenges
– Ikea Group's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Ikea Group's can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ikea Group's 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 Sustainability at IKEA Group: Video Supplement .
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 Group's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sustainability at IKEA Group: Video Supplement, Ikea Group's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
High dependence on third party suppliers
– Ikea Group's 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.
Regulatory challenges
– Ikea Group's 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 Technology & Operations industry regulations.
Consumer confidence and its impact on Ikea Group's 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ikea Group's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Group's.
Technology acceleration in Forth Industrial Revolution
– Ikea Group's has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Ikea Group's 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.
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 Group's 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ikea Group's 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.
Weighted SWOT Analysis of Sustainability at IKEA Group: Video Supplement 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 Sustainability at IKEA Group: Video Supplement 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 Sustainability at IKEA Group: Video Supplement 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 Sustainability at IKEA Group: Video Supplement 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 Sustainability at IKEA Group: Video Supplement 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 Group's needs to make to build a sustainable competitive advantage.