Traces the development of a Swedish furniture retailer under the leadership of an innovative and unconventional entrepreneur whose approaches redefine the nature and structure of the industry. Traces IKEA's growth from a tiny mail order business to the world's largest furniture dealership. Describes the innovative strategic and organizational changes Kamprad made to achieve success. In particular, focuses on his unique vision and values and the way they have become institutionalized as IKEA's binding corporate culture. The trigger issue revolves around whether this vital "corporate glue" can survive massive expansion into the United States and the Eastern Bloc and Kamprad's replacement as CEO by a "professional manager."
Swot Analysis of "Ingvar Kamprad and IKEA" written by Christopher A. Bartlett, Ashish Nanda includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kamprad Ikea's facing as an external strategic factors. Some of the topics covered in Ingvar Kamprad and IKEA case study are - Strategic Management Strategies, Design, Globalization, Growth strategy, Leadership, Managing people, Marketing, Operations management, Organizational culture, Reorganization, Succession planning and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Ingvar Kamprad and IKEA casestudy better are - – increasing transportation and logistics costs, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, technology disruption, geopolitical disruptions, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Ingvar Kamprad and IKEA
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ingvar Kamprad and IKEA case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kamprad Ikea's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kamprad Ikea'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 Ingvar Kamprad and IKEA can be done for the following purposes –
1. Strategic planning using facts provided in Ingvar Kamprad and IKEA case study
2. Improving business portfolio management of Kamprad Ikea's
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 Kamprad Ikea's
Strengths Ingvar Kamprad and IKEA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kamprad Ikea's in Ingvar Kamprad and IKEA Harvard Business Review case study are -
Analytics focus
– Kamprad Ikea'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 Christopher A. Bartlett, Ashish Nanda 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Kamprad Ikea's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kamprad Ikea's 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.
Organizational Resilience of Kamprad Ikea's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kamprad Ikea's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Kamprad Ikea's is one of the most innovative firm in sector. Manager in Ingvar Kamprad and IKEA Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Leadership & Managing People field
– Kamprad Ikea'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 Kamprad Ikea's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Kamprad Ikea's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kamprad Ikea's 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.
Operational resilience
– The operational resilience strategy in the Ingvar Kamprad and IKEA Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Kamprad Ikea'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 Ingvar Kamprad and IKEA HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Kamprad Ikea's is one of the leading recruiters in the industry. Managers in the Ingvar Kamprad and IKEA are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Kamprad Ikea's is present in almost all the verticals within the industry. This has provided firm in Ingvar Kamprad and IKEA case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that Kamprad Ikea'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.
High brand equity
– Kamprad Ikea's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kamprad Ikea's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Ingvar Kamprad and IKEA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ingvar Kamprad and IKEA are -
Interest costs
– Compare to the competition, Kamprad Ikea'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.
Lack of clear differentiation of Kamprad Ikea's products
– To increase the profitability and margins on the products, Kamprad Ikea's needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Ingvar Kamprad and IKEA, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Skills based hiring
– The stress on hiring functional specialists at Kamprad Ikea'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.
Low market penetration in new markets
– Outside its home market of Kamprad Ikea's, firm in the HBR case study Ingvar Kamprad and IKEA 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 Ingvar Kamprad and IKEA, is just above the industry average. Kamprad Ikea'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.
Products dominated business model
– Even though Kamprad Ikea's 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 - Ingvar Kamprad and IKEA should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Ingvar Kamprad and IKEA HBR case study mentions - Kamprad Ikea's 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 operating costs
– Compare to the competitors, firm in the HBR case study Ingvar Kamprad and IKEA 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 Kamprad Ikea's 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Kamprad Ikea's is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Kamprad Ikea's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kamprad Ikea's to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Kamprad Ikea'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.
Opportunities Ingvar Kamprad and IKEA | 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 Ingvar Kamprad and IKEA are -
Manufacturing automation
– Kamprad Ikea's can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kamprad Ikea's 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 Kamprad Ikea's to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Kamprad Ikea's has opened avenues for new revenue streams for the organization in the industry. This can help Kamprad Ikea's to build a more holistic ecosystem as suggested in the Ingvar Kamprad and IKEA case study. Kamprad Ikea's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Kamprad Ikea'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.
Buying journey improvements
– Kamprad Ikea's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Ingvar Kamprad and IKEA 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.
Building a culture of innovation
– managers at Kamprad Ikea'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 Leadership & Managing People segment.
Using analytics as competitive advantage
– Kamprad Ikea's 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 Ingvar Kamprad and IKEA - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kamprad Ikea's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Kamprad Ikea's 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.
Leveraging digital technologies
– Kamprad Ikea'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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kamprad Ikea's can use these opportunities to build new business models that can help the communities that Kamprad Ikea's operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Kamprad Ikea's 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kamprad Ikea'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, Ingvar Kamprad and IKEA, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Kamprad Ikea's in the consumer business. Now Kamprad Ikea's can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Ingvar Kamprad and IKEA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ingvar Kamprad and IKEA are -
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.
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. Kamprad Ikea'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.
Consumer confidence and its impact on Kamprad Ikea'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.
Shortening product life cycle
– it is one of the major threat that Kamprad Ikea's is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Kamprad Ikea'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 Leadership & Managing People industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Kamprad Ikea's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Kamprad Ikea's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Kamprad Ikea'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.
Increasing wage structure of Kamprad Ikea's
– 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 Kamprad Ikea's.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kamprad Ikea's 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.
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 Kamprad Ikea's business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Kamprad Ikea's 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.
Environmental challenges
– Kamprad Ikea'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. Kamprad Ikea's can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Weighted SWOT Analysis of Ingvar Kamprad and IKEA 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 Ingvar Kamprad and IKEA 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 Ingvar Kamprad and IKEA 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 Ingvar Kamprad and IKEA 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 Ingvar Kamprad and IKEA 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 Kamprad Ikea's needs to make to build a sustainable competitive advantage.