IKEA in Saudi Arabia (C) 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 (C)
Supplement to case 116015. 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 content 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 (C)" 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 (C) 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 (C) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing energy prices, there is backlash against globalization, etc
Introduction to SWOT Analysis of IKEA in Saudi Arabia (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IKEA in Saudi Arabia (C) 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 (C) can be done for the following purposes –
1. Strategic planning using facts provided in IKEA in Saudi Arabia (C) 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 (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea Saudi in IKEA in Saudi Arabia (C) Harvard Business Review case study are -
Highly skilled collaborators
– Ikea Saudi 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 IKEA in Saudi Arabia (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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 (C) 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.
Low bargaining power of suppliers
– Suppliers of Ikea Saudi in the sector have low bargaining power. IKEA in Saudi Arabia (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ikea Saudi to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Ikea Saudi is present in almost all the verticals within the industry. This has provided firm in IKEA in Saudi Arabia (C) 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.
Cross disciplinary teams
– Horizontal connected teams at the Ikea Saudi 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.
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.
Effective Research and Development (R&D)
– Ikea Saudi 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 in Saudi Arabia (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Weaknesses IKEA in Saudi Arabia (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IKEA in Saudi Arabia (C) are -
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.
Capital Spending Reduction
– Even during the low interest decade, Ikea Saudi 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.
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 (C) should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Ikea Saudi, firm in the HBR case study IKEA in Saudi Arabia (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study IKEA in Saudi Arabia (C), 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ikea Saudi is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study IKEA in Saudi Arabia (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study IKEA in Saudi Arabia (C), in the dynamic environment Ikea Saudi has struggled to respond to the nimble upstart competition. Ikea Saudi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As IKEA in Saudi Arabia (C) HBR case study mentions - Ikea Saudi 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Karthik Ramanna, Jerome Lenhardt, Marc Homsy suggests that, Ikea Saudi 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.
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.
Skills based hiring
– The stress on hiring functional specialists at Ikea Saudi 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.
Opportunities IKEA in Saudi Arabia (C) | 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 (C) are -
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 (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ikea Saudi to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Ikea Saudi to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Ikea Saudi 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.
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 (C) 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.
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.
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 (C) - 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.
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.
Manufacturing automation
– Ikea Saudi can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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 Saudi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Ikea Saudi can develop new processes and procedures in Finance & Accounting 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.
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 (C) 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 (C) are -
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 Saudi needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ikea Saudi 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 in Saudi Arabia (C) .
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.
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.
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.
Environmental challenges
– Ikea Saudi 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 Saudi can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ikea Saudi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 (C), 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 .
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 Saudi 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 Saudi.
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.
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.
Weighted SWOT Analysis of IKEA in Saudi Arabia (C) 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 (C) 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 (C) 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 (C) 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 (C) 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.
