Case Study Description of IKEA India: Expanding to Success
In May 2017, IKEA India's chief executive officer (CEO) was facing a dilemma. The company had decided to start its business operations in India by opening an experience centre in Hyderabad in November 2018, followed by furniture retail outlets across India by 2025. Key target segments were young, middle-class price-conscious consumers. IKEA India aimed to sell its products at a low price, aligning with its vision. However, the CEO was challenged with developing a strategy for business growth at a time when major global retailers were going bankrupt. He needed to figure out the appropriate pricing and supply chain strategy for India's complex and diverse environment, while offering value to consumers. Mokhalles Mehdi is affiliated with Kaziranga University. Lubna Nafees is affiliated with Appalachian State University.
Authors :: Mokhalles Mehdi, Lubna Nafees, Shriraam S. Bhagavath
Swot Analysis of "IKEA India: Expanding to Success" written by Mokhalles Mehdi, Lubna Nafees, Shriraam S. Bhagavath includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea India facing as an external strategic factors. Some of the topics covered in IKEA India: Expanding to Success case study are - Strategic Management Strategies, Growth strategy, Managing people and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the IKEA India: Expanding to Success casestudy better are - – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of IKEA India: Expanding to Success
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IKEA India: Expanding to Success case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea India, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea India operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of IKEA India: Expanding to Success can be done for the following purposes –
1. Strategic planning using facts provided in IKEA India: Expanding to Success case study
2. Improving business portfolio management of Ikea India
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea India
Strengths IKEA India: Expanding to Success | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea India in IKEA India: Expanding to Success Harvard Business Review case study are -
Ability to lead change in Leadership & Managing People field
– Ikea India 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 India in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Ikea India in the sector have low bargaining power. IKEA India: Expanding to Success has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ikea India to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Ikea India is one of the most innovative firm in sector. Manager in IKEA India: Expanding to Success Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Ikea India 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 India has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in IKEA India: Expanding to Success 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 India is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Ikea India is present in almost all the verticals within the industry. This has provided firm in IKEA India: Expanding to Success 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.
Superior customer experience
– The customer experience strategy of Ikea India in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Ikea India has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ikea India to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Ikea India 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.
Effective Research and Development (R&D)
– Ikea India 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 IKEA India: Expanding to Success - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Ikea India has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea India 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.
Weaknesses IKEA India: Expanding to Success | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IKEA India: Expanding to Success are -
High bargaining power of channel partners
– Because of the regulatory requirements, Mokhalles Mehdi, Lubna Nafees, Shriraam S. Bhagavath suggests that, Ikea India 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.
Interest costs
– Compare to the competition, Ikea India 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.
Increasing silos among functional specialists
– The organizational structure of Ikea India is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Ikea India needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ikea India to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the IKEA India: Expanding to Success 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 India has relatively successful track record of launching new products.
Need for greater diversity
– Ikea India 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.
Aligning sales with marketing
– It come across in the case study IKEA India: Expanding to Success that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case IKEA India: Expanding to Success can leverage the sales team experience to cultivate customer relationships as Ikea India is planning to shift buying processes online.
Products dominated business model
– Even though Ikea India has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - IKEA India: Expanding to Success should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Ikea India products
– To increase the profitability and margins on the products, Ikea India needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study IKEA India: Expanding to Success, is just above the industry average. Ikea India 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.
Skills based hiring
– The stress on hiring functional specialists at Ikea India 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.
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 India supply chain. Even after few cautionary changes mentioned in the HBR case study - IKEA India: Expanding to Success, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ikea India vulnerable to further global disruptions in South East Asia.
Opportunities IKEA India: Expanding to Success | 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 India: Expanding to Success are -
Creating value in data economy
– The success of analytics program of Ikea India has opened avenues for new revenue streams for the organization in the industry. This can help Ikea India to build a more holistic ecosystem as suggested in the IKEA India: Expanding to Success case study. Ikea India can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Ikea India can develop new processes and procedures in Leadership & Managing People 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 Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea India 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 India 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 India 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ikea India in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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 India in the consumer business. Now Ikea India can target international markets with far fewer capital restrictions requirements than the existing system.
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 India 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 India 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Ikea India 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 India can use these opportunities to build new business models that can help the communities that Ikea India operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Using analytics as competitive advantage
– Ikea India 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 India: Expanding to Success - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ikea India to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Ikea India to increase its market reach. Ikea India 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ikea India 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 IKEA India: Expanding to Success External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study IKEA India: Expanding to Success are -
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 India in the Leadership & Managing People sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ikea India in the Leadership & Managing People industry. The Leadership & Managing People 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.
Increasing wage structure of Ikea India
– 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 India.
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 India business can come under increasing regulations regarding data privacy, data security, etc.
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 India.
Regulatory challenges
– Ikea India 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 Leadership & Managing People industry regulations.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea India 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 India has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Ikea India needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Stagnating economy with rate increase
– Ikea India 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.
Consumer confidence and its impact on Ikea India 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.
Shortening product life cycle
– it is one of the major threat that Ikea India is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study IKEA India: Expanding to Success, Ikea India may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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 India needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Weighted SWOT Analysis of IKEA India: Expanding to Success 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 India: Expanding to Success 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 India: Expanding to Success 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 India: Expanding to Success 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 India: Expanding to Success 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 India needs to make to build a sustainable competitive advantage.