IKEA in Saudi Arabia (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of IKEA in Saudi Arabia (A)
A Swedish newspaper reveals that IKEA has erased all images of women from its catalog for Saudi Arabia. The article sparks criticism of IKEA from the Swedish government and its customers in the West. Critics contend that IKEA is not living up to its own commitments to gender equality. Some threaten a boycott. IKEA must respond. Reissuing the catalog with women included risks running afoul of Saudi censors who can impose harsh penalties. The company has had a presence in Saudi Arabia for nearly 30 years.
Authors :: Karthik Ramanna, Jerome Lenhardt, Marc Homsy
Swot Analysis of "IKEA in Saudi Arabia (A)" written by Karthik Ramanna, Jerome Lenhardt, Marc Homsy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea Saudi facing as an external strategic factors. Some of the topics covered in IKEA in Saudi Arabia (A) case study are - Strategic Management Strategies, Globalization, Leadership, Organizational culture and Finance & Accounting.
Some of the macro environment factors that can be used to understand the IKEA in Saudi Arabia (A) casestudy better are - – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of IKEA in Saudi Arabia (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IKEA in Saudi Arabia (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea Saudi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea Saudi 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 in Saudi Arabia (A) can be done for the following purposes –
1. Strategic planning using facts provided in IKEA in Saudi Arabia (A) case study
2. Improving business portfolio management of Ikea Saudi
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea Saudi
Strengths IKEA in Saudi Arabia (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea Saudi in IKEA in Saudi Arabia (A) Harvard Business Review case study are -
Organizational Resilience of Ikea Saudi
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea Saudi does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ikea Saudi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ikea Saudi 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.
Analytics focus
– Ikea Saudi 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 Karthik Ramanna, Jerome Lenhardt, Marc Homsy 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.
Learning organization
- Ikea Saudi 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 Saudi is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in IKEA in Saudi Arabia (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Ikea Saudi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ikea Saudi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Ikea Saudi is one of the most innovative firm in sector. Manager in IKEA in Saudi Arabia (A) 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 Saudi 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.
Successful track record of launching new products
– Ikea Saudi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea Saudi 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.
Strong track record of project management
– Ikea Saudi 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 Saudi is present in almost all the verticals within the industry. This has provided firm in IKEA in Saudi Arabia (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.
Ability to lead change in Finance & Accounting field
– Ikea Saudi 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 Saudi 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 Saudi has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in IKEA in Saudi Arabia (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.
Weaknesses IKEA in Saudi Arabia (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IKEA in Saudi Arabia (A) are -
Aligning sales with marketing
– It come across in the case study IKEA in Saudi Arabia (A) 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 in Saudi Arabia (A) can leverage the sales team experience to cultivate customer relationships as Ikea Saudi is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study IKEA in Saudi Arabia (A), is just above the industry average. Ikea Saudi 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.
Slow decision making process
– As mentioned earlier in the report, Ikea Saudi 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 Saudi 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.
Interest costs
– Compare to the competition, Ikea Saudi 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study IKEA in Saudi Arabia (A), it seems that the employees of Ikea Saudi 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.
Lack of clear differentiation of Ikea Saudi products
– To increase the profitability and margins on the products, Ikea Saudi needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Ikea Saudi 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 in Saudi Arabia (A) should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Ikea Saudi 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 operating costs
– Compare to the competitors, firm in the HBR case study IKEA in Saudi Arabia (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ikea Saudi 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the IKEA in Saudi Arabia (A) 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 Saudi has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Ikea Saudi needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities IKEA in Saudi Arabia (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 in Saudi Arabia (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Ikea Saudi 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.
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 Saudi 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 Saudi 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.
Using analytics as competitive advantage
– Ikea Saudi 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 in Saudi Arabia (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ikea Saudi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Ikea Saudi 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 Finance & Accounting segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ikea Saudi 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, IKEA in Saudi Arabia (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea Saudi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Saudi in the consumer business. Now Ikea Saudi can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea Saudi 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 Saudi 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.
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 Saudi can use these opportunities to build new business models that can help the communities that Ikea Saudi operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Loyalty marketing
– Ikea Saudi 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.
Buying journey improvements
– Ikea Saudi can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. IKEA in Saudi Arabia (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ikea Saudi can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats IKEA in Saudi Arabia (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 in Saudi Arabia (A) are -
Increasing wage structure of Ikea Saudi
– 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 Saudi.
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 Saudi.
High dependence on third party suppliers
– Ikea Saudi 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.
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 Saudi 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.
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 Saudi in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Ikea Saudi is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Ikea Saudi 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea Saudi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Ikea Saudi 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 Finance & Accounting industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Ikea Saudi has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ikea Saudi needs to keep up with the evolution of technology in the Finance & Accounting 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.
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 in Saudi Arabia (A), Ikea Saudi may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
Weighted SWOT Analysis of IKEA in Saudi Arabia (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 in Saudi Arabia (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 in Saudi Arabia (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 in Saudi Arabia (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 in Saudi Arabia (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 Saudi needs to make to build a sustainable competitive advantage.
