The global success of IKEA is often attributed to the company’s affordability. However, several internal and external factors affect business operations at IKEA.
So, if you’d like a detailed IKEA analysis that includes well-researched strengths, weaknesses, opportunities, and threats, keep reading to see what I found out!
What is IKEA’s Swot Analysis In 2022?
IKEA’s SWOT analysis reveals the company’s strengths in maintaining affordability while offering high-quality furniture in 2022. However, the analysis also presents the company’s weaknesses, such as the challenges experienced by customers in product assembly and the limited physical outlets. Furthermore, the SWOT analysis highlights global expansions and increasing online footprints amidst threats such as intense competition.
If you’d like to find out more about IKEA’s SWOT analysis, keep reading for useful facts!
What are the Strengths of IKEA?
The strengths in the SWOT analysis of IKEA highlight the internal strategic factors that contribute to the company’s success.
IKEA’s strengths include the following:
- Leading furniture brand
- Product variety and promotion
- Global presence
- Extensive market research
- Strong Supply Chain
- Remarkable in-store customer experience
Among IKEA’s main reasons for its remarkable success is its affordability. The company maintains a low-price strategy to offer furniture pieces and home products at competitive prices.
Consequently, the affordability of items in the store gives the company a competitive advantage over other stores that sell similar products at higher prices.
Further, the affordability of the store allows customers to meet their furniture needs and preferences.
2. Unique Products
One of the most prevalent strengths of IKEA is that the company strives to renew its products frequently without changing its core values.
IKEA ensures the uniqueness of furniture products through creativity and innovation while specializing in products that are affordable, functional, good quality, and are easily assembled or reassembled.
Thus, customers are drawn to IKEA’s stylish designs, with the added advantage of being affordable.
3. Leading Furniture Brand
IKEA has rapidly grown into the most recognizable furniture brand across the globe. The company has also been ranked as the most valuable furniture retail brand globally, with a value estimated to be at $48.1 billion.
Through a series of strategic factors, the company has succeeded in creating an image for itself as one of the leading furniture companies in the world.
With over 600 million customers visiting the store annually, the brand attracts customers of different nationalities, social classes, ethnic groups, and ages.
4. Product Variety and Promotion
Unlike most of IKEA’s competitors, the company owns a diverse product portfolio.
Moreover, the company owns a product range of more than 12,000 products in different home furniture categories.
The Swedish furniture retail brand ensures to promote the wide array of furniture products through cross-merchandising and displays to increase the visibility of its products.
In addition to the furniture business, the company operates restaurants, flats, and houses.
5. Global Presence
Currently, IKEA operates 458 stores across 60 markets in the world.
The company initiates different strategies to penetrate new markets by testing several formats in a bid to ascertain which formats suit certain markets. Currently, IKEA has established over 60 test format stores in the world.
6. Extensive Market Research
A significant aspect of IKEA’s continuous success in product development and design is the attention to what customers want.
First, IKEA understands that its target market is customers who need affordable furniture that can hold up under most wear-and-tear conditions while maintaining its attractive design.
With customer interests in mind, IKEA delivers the right mix of design and value.
7. Strong Supply Chain
IKEA is renowned for maintaining world-class supply chain management.
The company also has substantial control over its supply chain and delivery processes to maintain its ability to deliver its products to retailers and customers.
Additionally, IKEA is committed to long-lasting relationships with suppliers to ensure an unlimited supply of large volumes of products at lower prices.
The substantial control of the supply chain ensures that IKEA is fully stocked and can always meet the customer’s demands.
8. Remarkable Customer Experience
IKEA’s storefronts have been recognized as a master class in the consumer experience. Customers at the stores are always guided through well-manicured showrooms featuring floor models of different pieces and mockups of actual rooms.
This way, customers can visualize how products purchased at the store can be paired to make complete and unique designs.
Once the customer selects, they enter the purchasing area to buy the preferred pieces of furniture.
Furthermore, IKEA stores provide bonus areas such as grocery corners and restaurants to enlighten the customer experience further.
What are the Weaknesses of IKEA?
An analysis of IKEA’s weaknesses reveals the internal factors that negatively affect the company’s business operations.
IKEA’s weaknesses include the following:
- Challenges in product assembly
- High reliance on third-party manufacturers
- Limited physical outlets
- Negative publicity
- Product standardization
- Product recalls
1. Challenges in Product Assembly
Although IKEA appeals to most customers due to the resulting designs and low purchase prices, customers also have frustrations in assembling furniture products without professional assistance.
The assembly instructions provided can be confusing, with the assembly process portrayed comically in different mediums.
Furthermore, potential inconsistencies in the packing process result in some pieces not being included in the delivered packages. Hence, customers have to wait longer to receive these additional pieces.
2. High Reliance on Third-Party Manufacturers
Like several other companies, IKEA contracts third-party manufacturers for most of its furniture products.
Due to this reliance on third parties, IKEA compromises product quality even though it generally keeps the costs down by outsourcing the work.
Furthermore, IKEA must rely on the manufacturer’s potential to use quality specifications and deliver on the final design.
3. Limited Physical Outlets
Despite operating numerous outlets from across the world, the company’s reach is still limited. In most cases, the stores are located in major cities and towns, creating a disadvantage for people who live far from the cities and towns.
Individuals who do not live close to the cities end up missing out due to the long distances.
IKEA is also majorly concentrated in North America and Europe while having a low presence in the Asian market.
Since Asia is a continent leading in population, IKEA might gain a large customer base there.
4. Negative Publicity
IKEA has been criticized on several occasions for issues surrounding questionable advertising practices, poor treatment of employees, and lobbying government authorities.
In addition to this, the high demand for IKEA products affects large tracts of forest covers, resulting in antagonism from conservationists who view the company as a threat to the environment.
Ultimately, the negative publicity leads to a decrease in brand reputation and customer loyalty.
5. Product Standardization
Some of IKEA’s products have been marked as low quality due to the commitment to maintain furniture prices at competitive rates.
Such a reputation has turned off customers, especially those who associate the brand name with high product quality.
Additionally, some customers have reported furniture breakages that occur almost immediately after purchase.
Due to such negative reviews, the company has lost several customers.
6. Product Recalls
IKEA has been hit by numerous product recalls over the last decade. For instance, in 2016, IKEA had to recall millions of products because they were deemed harmful for children.
The failure in conducting substantial “stability tests” for the products was the leading cause of these recalls.
Moreover, IKEA has received several criticisms for the inadequate handling of these massive recalls.
7. Discontinued Products
IKEA owns a limited product line and sometimes discontinues some of its products. Although discontinuing the products may be good for inventory control, it also disadvantages loyal customers who look for specific furniture pieces.
What are the Opportunities for IKEA?
In the SWOT analysis, IKEA’s opportunities highlight all external strategic factors that are pathways for the company to reach higher limits.
IKEA’s opportunities include the following:
- Global expansion
- Online ventures
- Technological innovations
- Expansions to the growing grocery market
1. Global Expansion
In the last year, retail markets are reported to have grown by approximately 5% in emerging markets.
This growth presents an opportunity for IKEA to grow its revenue.
Currently, IKEA majorly operates in developed economies but has not expanded to developing economies, except for China.
IKEA has great potential in expanding into new developing economies such as Indonesia, Malaysia, Brazil, and Mexico to increase its presence in such markets and further sustain its growth.
2. Online Ventures
According to recent statistics, online retail stores have experienced a surge in online shopping since most customers are changing their shopping habits.
Online sales continue to grow constantly, with more than 800 million visitors on IKEA’s website.
Therefore, IKEA can exploit the opportunities presented by shifts in shopping trends and increase its online footprint.
3. Technological Innovations
Due to the recent developments in technology, customers are becoming more tech-savvy and demanding.
Therefore, to curb stiff competition from other furniture retailers, IKEA cannot overlook integrating technological innovation into the company’s business model.
With the right strategies of implementing technology, IKEA can boost its productivity and result in more sales, which will enhance its revenue.
Using technology would also minimize wastage by streamlining company operations. As a result, IKEA can reduce operational costs and boost profit margins in the long run.
This way, the company would be in a better position to prevent the loss of customers due to intense competition within the industry.
4. Expansion to the Growing Grocery Market
Due to the current trend of consuming healthier food options, there has been a higher demand for grocery products within developed countries.
Therefore, IKEA has the opportunity to increase healthy foods and fresh produce in its grocery stores and restaurants.
Since the company is successfully managing its food outlets, introducing healthier items on the menu will go a long way toward attracting more customers to IKEA’s restaurants and stores by extension.
What are the Threats of IKEA?
IKEA’s threats in the furniture retail industry include all external forces and factors that limit the company’s full potential.
Some of IKEA’s threats include the following:
- Aggressive competition
- Effects of inflation
- Potential lawsuits
- Lack of sustainable sources of raw materials
1. Aggressive Competition
A significant threat to IKEA’s business operations is the increasing competition arising from other furniture retailers.
The market is increasingly becoming more crowded with other companies offering luxurious furniture at affordable prices.
Moreover, other companies have started to emulate IKEA’s business model and offerings to consumers to capture the market share away from IKEA.
IKEA’s competitors include large-scale retailers like Walmart and medium-sized furniture chains like Williams-Sonoma Inc. and Crate & Barrel (C&B).
2. Potential Lawsuits
Several countries have placed laws advocating for warnings on products to reduce the number of injuries and deaths.
For instance, in 1935, Sweden established the mandate to include safety marking on products that may cause injuries.
Therefore, IKEA began including warning instructions on its products in a bid to adhere to the established laws.
Unfortunately, IKEA is not consistent in this process. Therefore, if IKEA completes production, packaging, and shipment processes without due diligence, the products may cause injuries, resulting in a lawsuit.
3. Lack of Sustainable Sources of Raw Materials
IKEA has established itself as a company retailing low-cost furniture. However, the success of the company may be jeopardized due to threats on how IKEA sources wood as its primary raw material.
Due to the recent rise in global warming and climate change, IKEA might get itself on the wrong side with environmental conservationists and activists.
If IKEA faces threats from such groups, the company’s production and sales will decrease, hence affecting net profit.
The SWOT analysis of IKEA presents the company’s internal success factors such as high quality and affordability.
However, weaknesses such as limited physical presence may affect the company, and therefore the company might consider these weaknesses as opportunities for improvement and growth.