IKEA SWOT, Porters 5 and PESTEL Analysis

IKEA uprise, Porters 5 and PESTEL AnalysisJump to SWOT, Porters 5Forces, PESTELINTRODUCTIONIKEA has created its take tag name in the manhood of furnishing at an affordable price. IKEA strives to make a better life for m whatsoever another(prenominal) by offering wide variety of salutary- numbered, practicable home furnishing items at affordable prices.HistoryIKEA was found in 1943 by Ingvar Kamprad in sm completely village Agunnaryd , Sweden. Originally company sold the basic family goods at discount prices later kamprad start to sell the home furnishing and 10 year later IKEA opened its first showroom, clearly demonstrates the function and quality of its low-price increases. In 1955 IKEA introduce its own Designing furniture and in 1956 matted battalions and self-assembly were launch (which reduced production and transport tolls) and in later year IKEA has opened 301 stores all over Europe and Asia which shows the success of company.PresentIn 2002, IKEA Group was univer se of discourses top furniture retailers. The total number of stores 301 operated by IKEA in 37 countries/territories. The IKEA Group itself owns 267 stores in 25 countries with 123,000 co-workers and generating annual sales of more than 21.5 billion euro (these facts atomic number 18 taken from IKEA website). in that location are wide range of products in IKEA stores from plants and living room furnishings to toys and safe and sound kitchens. At IKEA their vision is to create a better everyday life for the galore(postnominal) people what make IKEA as gentlemans gentlemans top furniture retailers, matchless approaches of IKEA reap the customer whether its affordable price, portable furniture or the unique design in store, Swedish caf in the stores, child care facility in the storesSWOT Analysis of IKEAStrengths angiotensin converting enzyme of the strongest strengths of IKEA is their strong mail nameIKEA is widely known brand in Europe and some Asian countries.In 2002 IKEA wa s the worlds most illustrious furniture retailer. 1Unique selling point of IKEA is low prices and flat pack furniture which is economical for customer and easy to transportExclusive furniture design catch the attention of the customerCheap Prices of IKEA furniture offers value to CustomerExclusive furniture design catch the attention of the customerAs produce in trade Times Ikea catalogue is the third most printed book in the world after Bible and Harry Potter 2Furniture are easy to assemble and easy to shipIKEA has Strong potential of Global sourcingPowerful publicizing movementIKEA has built its own brand name and systematically strives to maintain itIn mid- 1990s IKEA had launched a mellowed profile advertising campaign in USA intending to raise awareness of the IKEA brandUK wide advertising campaign in September 2007 titled Home is the near Important Place in the World using estate agent signs with the term not for Sale written on them as part of the wider campaignWallet s for Oyster cards and tube map are sponsored by IKEAIKEA consciously runs advertising campaign to create brand awareness.IKEA maintain Long-term Relationship with suppliersIKEA has preserved tenacious-term relationship with its suppliers.IKEA purchases products in superior volume from suppliers which allows IKEA to keep their product prices lowIt has round 45 trading service offices in 31 countries. This enables them to develop close relationships with more than 1,350 suppliers in 50 countriesProduct improvementIKEA is actively victorious initiatives in environment changes, they strongly cares about forest and support the suppliers to minimize the total impact on the climates by contributing in forest projects.Weakness supplier dependenciesOne of the main weakness of the IKEA is that it is parasitical on the supplier for its manufacturing their productsBy totally dependencies on suppliers IKEA convert its strength toIKEA does not manufacture anything itself and is heavily depe ndent on the supplier.By limiting the manufacturing facilities means more dependencies on the suppliers.Ikea furnitures need to assemble yourself may be its is unattractive to certain groups of consumersStore design fag be confusing for those customer who need particular itemSwedish design may not so appealing to other regions of world major Reliability on European Markets90% of IKEA stores are based in European regions and rest in America, Middle East and Asia , Ikea is limiting themselves to enter into the challenger kitty take benefit of IKEAs non existences in the other fast growing retails markets analogous America, Middle East and Asia by expanding their businesses.Quality and standardsIts difficult to maintain high Quality and standards globally due to the size and scale of productsPeople generally associate the low prices with bad quality of products and non durabilityIkea furnitures not manufacture for life sentenceOpportunitiesExpansion in untouched retails marketIKEA should extent their business or stores from international to global market , by developing in other regions like Asia and Eastern EuropeBy expanding in fast growing retails markets IKEA can capture additional share in Asia and Eastern EuropeOnly 10% percentages of stores were in underdeveloped markets. Its an excellent opportunity for IKEA to expand and grow their businesses in the untouched markets organic evolution in EcommerceIKEA should enlarge their internet present in markets card-playing growing virtual markets in the Internet revolution era gives an excellent opportunity to IKEA to enlarge their place in the online business all over the world like ebay , Amazon.com, IncIKEA can expand their business by collaboration of local companies and suppliers.By developing E-commerce site and local company alliances gives an opportunity to achieve development in existing business and can gain untested acquisitionIn additional it will help to increase customer service joy and customer feedbackAlso it can reduce the work pressure from store to certain levelDesign various type of StoreIt will be good opportunities for IKEA to try new outlay of store to easily find the particular products which will increase the growth sales and customer satisfactionMinimizing raging (IKEA and the new EU legislation on chemicals)IKEA avoids use of chemicals and materials that can be of any harm to people and the environment. All IKEA products for all markets, everywhere in the world will adhere to the chemical restrictions in the REACH legislation.Efficient use of materialsIKEA strives to use fewest resources to make the best possible products, without having any negative incumbrance on the functionality or the design or the look of the products. The main material used in the manufacturing of the products is wood, cotton, metal, plastic, glass and rattan and we work towards using as many renewable and recyclable materials as possible.ThreatsImpact of European economyAs IKEA is p redominantly present in European region, any adverse effects in this region will impact the business of IKEA.Major sales and purchasing are done is European markets.In order to avoid such situation, it involve to secure place in other retail market and increase awareness of the IKEA brand and products worldwideCompetitionIndirect threat of competitionOne of the fastest growing emulous retail market in Europe and other businesses regions of IKEADifficult to preserve good quality and design at threepenny prices when competition is increasing rapidly growing e.g. In USA Wal-Mart , room to go , kmart ,In Japan Nitori Co and MUJIEven average retailers are producing low cost values flat packed furniture, which can put tremendous impact on the IKEA.Advantages of competitionCompetition is aggressively offer similar productMost of retailers promising to serve on high quality of and serviceEducating customer on quality of woods, construction techniques and so onCompetitions are offering p lain delivery of assembled furniture whereas IKEA is not giving any options to customer on the transportationSummary of IKEA SWOT ANALYSISSWOT analysis describes IKEAs strengths and weakness, as well as encountering the threats with opportunities which will secure IKEAs place in the retail marketStrength of IKEA group in the world of retail markets is their Vision IKEA strives to make a better life for many by offering wide variety of well-designed, practical home furnishing items at affordable prices which display their clear business idea.3IKEA bribe massive from the suppliers and gain advantage of low cost product which is one of strongest strength of IKEA , as they can sale the finished goods in cheaper than competitorsIKEA is good long term business relationship with the suppliers and weakness is the total dependencies on the supplier which can be the threat in their future business.Business Strategy of IKEA gives the excellent opportunities to expand their services to the w orld widely and but by limiting their expansion only to the European and selected Asian countries can be biggest threats and can be advantage to the competitors due to the non-existences of IKEAPorters 5 forces analysis of IKEACompetition from Substitutes HIGHThe furniture retails market is on developing stage. Competition from Substitute it is high in the new-made time people consider better products if it is costly. The switching costs are high and Substitute will be other brands supplier at high prices. Other options might be cheap furniture from local supplier. But IKEA can competitive advantage from low prices, unique design and flat pack furnitureBargaining power of buyers LOWIKEA focuses on large segments and target individual customers young people aged around 20 to 40 historic period as in the modern world people prefers compact and foldable furniture so it is easy use and transport.IKEA products are affordable for everyone because of the low prices. There is high custome r loyalty therefore low bargaining power of customers. One more reason of low bargaining power can the brand name of IKEA, consumer can buy the same furnitures from capitation but because of the IKEA trademark they prefer to buy.Furnitures Industry is growing tremendously, there is very high switching cost for the buyers and with the product differentiation is prime factors.Therefore Because of the brand and large collection of product the customer loyal and preference is IKEAThreat of New Entrants LOWThe Home Furnishings business firm wares Retail industry is developed markets and IKEA has its own reputation and assures players in retail markets. It is very difficult to compete against with big players in the industry as to spend a penny to own status brand lots of resources such as unique design, engineering, low cost products, infrastructure and human resources. IKEA having a very long experience in its field and it has established itself differently from competitors. IKEA s tores and distinguished itself as a functional home products .In Retail industry, low cost and use new technology is very essential and IKEA spent years to establish this reputation .However for a new entrant it is difficult to get.Bargaining power of supplier LOWIKEA deals with suppliers for woodwind cotton, metal, plastic, glass and rattan.IKEA ease up more 1,300 direct suppliers and about 10,000 sub-suppliers in 60 countries and 28 distribution centres and 11 customer distribution centres in 16 countries.IKEA had preparedness up its own code and conducts for the suppliers. Being a Multinational brand there is a competition among supplier for selling to IKEA. They purchase in wide volume of material from the suppliers at low costIKEA buy massively from these suppliers to deliver in the European marketThe Bargaining power of suppliers is low as they can lose their one of biggest clientsRivalry among existing firms HIGHIKEA competitors are mainly in the Home Furnishings House w ares Retail industry and competition from Substitutes too high in the industry. Some competitors for IKEA such as Wal-Marts, TGT, kmart in Japan Nitori Co. Many manufacturers provide furniture with same functions and design. As published in Business Times we can take Example of TGT has recruited top designer Thomas OBrien to develop a range of low-priced furnishings and In Japan Nitori Co. has a occupy on low-cost furniture.4 Competition is putting a lot of resources to manufacture the same type of productsStrategic Position of IKEAIKEA PESTLE analysisPolitical FactorsGovernments possess put various taxes, duties and vat on IKEA products their constitutions in different countries.Changes in the government and trading policies can threat to IKEAFor example Russian government has unplowed on hold all new investment and delaying unpredictability of the administrative processes for Mega-Samara mall sports in Russia because of the delay IKEA have to postponed the 30 new stores in the country5knowingness of political situation of every country where company is operating ImportantMany countries offers incentive to attract the foreign investment like Malaysia , china and ThailandIKEA has openhanded from a small company to largest home furniture retailer in the world, Political factors has direct impact and is interrelated on other aspect. Political factors can control the process of business and greatly impact on the operating industry. As IKEAs major business is on the European regions, it has to adopt the guidelines and policy form by the EU.Economical FactorsInterest rates and exchange rates have a direct impact on company. Some time foreign coin exchange fluctuation may be beneficial or un beneficial for IKEADue to recession demand for home furniture declined as people dont have money to buy expenses products and customers go for cheap alternatives.Fluctuation in cost of raw material can be threat for the IKEA , as they dont produces on its own , but buy from whole sellerRecession has impacted on all kind of industry more or less it has effected on IKEAIn todays time global warming is important concern to every business should consider to reducing elements effect the environmentSocial FactorsIKEA takes initiatives and founded a act to invest in the social programmes on a global level which can give IKEA a recognized globallyIKEA is proactively trying to fight against barbarian labour and give better life to childrenEveryone is trying to save and reduce the causes of global warming does IKEA is The IKEA contributed much in the society as they provide recyclable products and try to minimize the xeroxTechnological FactorsIKEA products are eco-friendlyIKEA should consider natural resources like using solar power renewal naught usage and free energy efficienciesOne of Important aspect which should be take into account as a need of new trends in changing business styles and enhance the competitive advantage which development of E-commerc e and entre the world of Online business (virtual markets)Legal FactorsGovernments may put a negative as well as positive impact on IKEA as it is operating all over the globe hence it may vary according to different countries.In 2004 Irish Government had implement equity of restricting the maximum size of a retail outlet to 6,000 (units?) to save the small business but retails giant of home furnishing wants IKEAs plan to build stores in Dublin and usual size of IKEA stores is four time bigger caused the law be put up for debate. In Jan 2005 The Government has agreed to change the proviso laws clearing the way for furniture stores such as Ikea to open in IrelandIKEA and the new EU legislation on chemicalsIKEA avoids use of chemicals and materials that can be of any harm to people and the environment. All IKEA products for all markets, everywhere in the world will adhere to the chemical restrictions in the REACH legislation.Environmental FactorsProduct DevelopmentIKEA is proactively taking initiatives in climate change projects. As 50% of the raw material is from the forest, it strongly cares about forest. The effort is to leave minimum impact on environment. It contributes to many forestry projects and honour certification by the Forest Stewardship CouncilErase the WasteIKEA believes in using Waste by-products generated due to manufacturing where possible. In 2006, IKEA implemented the EU directive on Waste Electrical and Electronic Equipment (WEEE) and IKEA stores now accept and recycle IKEA electrical produce and electronic devices. Customers can also return certain types of waste such as discarded packaging, spent batteries and low-energy bulbs for proper recycling and disposal. In 2006, IKEA stores and distribution centres handled 281,734 tons of waste, of which 81% was sorted for recycling reuse or energy recover. In the pursuit of recycling, as of October 1, 2008, IKEA USA no longer sells throwaway bags. IKEA products are recyclable and make minimum us age of polythene.Product DevelopmentIKEA is proactively taking initiatives in climate change projects. As 50% of the raw material is from the forest, it strongly cares about forest. The effort is to leave minimum impact on environment. It contributes to many forestry projects and honours certification by the Forest Stewardship CouncilClimate changingIKEA ensures that the products and resources are customized to reduce any negative impact on the environment.IKEA Group and WWF co-operate in projects at intended to reducing carbon dioxide emissions generated by IKEA operations.6ConclusionIKEA is well recognized brand for flat pack furniture and Swedish design in the world of furnishings, also they are leading retailers in globally. IKEA should explore their new opportunities into asian market as there is no major competition in flat pack furnishing and also due to over population in some asian countries flat pack can be eye catching for new customer as IKEA captured 90% of European . I KEA should seek to introduce new technologies to reduce use of wood.