In-Depth SWOT Analysis of Ikea | Strengths Weaknesses Opportunities & Threats

About Ikea:

IKEA is a furniture and home furnishings retailer that was founded in 1943 in lmhult, Sweden. It has expanded exponentially since its inception, and it is now the world’s largest furniture business. The company is known for its Scandinavian design, with the majority of IKEA’s furniture available in flat-pack form, ready for the customer to assemble. IKEA is a household name in the global ready-to-assemble (RTA) furniture industry.

As of 2020, one of the world’s largest furniture retailers with over 445 stores in 48 countries, about 220,000 IKEA employees worldwide, represents a nearly 70,000 increase in the workforce since 2013.

Ikea offers home furnishings that are designed to be simple and easy to assemble. These include furniture, kitchen appliances, housewares, entertainment centers, textiles, and decor.

The company also offers a wide-ranging catalog of home and lifestyle accessories available through its mail-order catalogs, the internet, and stores.

International expansion is a key component of the company’s strategy for growth, as evident in its entry into India, targeting the middle-class population in Tier II and Tier III cities.

IKEA was the fourth most profitable retailer globally in 2020, making it the most valuable furniture retail brand, with a market cap of nearly $48.1 billion. In the same year, IKEA stores would have served over 800 million customers. IKEA is a Swedish furniture retailer.

IKEA Group’s total annual sales in 2020 are estimated at 39.6 billion euros, down from 41.3 billion euros the previous year.

IKEA’s deep awareness of its customers is one of its core competitive advantages.

SWOT Analysis of Ikea

Ikea Strengths:

#1 Customer need: The brand understands what its customers want. They want a decent mix of low-cost furniture and home appliances. The fact that the company devotes so much time and resources to getting desired goods on the market demonstrate that it is on the right track.

#2 Superior brand recognition: Ikea uses the same catalog worldwide and translates it into the various languages of its target markets. In this way, Ikea ensures a consistent look and feel.

#3 Low price: The company’s main strength is its ability to provide quality furniture and home goods at very low prices. Competitors literally have no chance.

#4 Product development capability: Ikea has an exemplary record when it comes to developing new products. Its various lines of furniture are constantly in development in order to meet customer’s needs.

#5 Superior distribution systems: Ikea has a good understanding of where its products will be sold and when. This keeps clients happy and ensures the timely delivery of goods.

#6 Superior service: This is one of Ikea’s strengths as customers feel that their needs and problems are being taken care of. Even after buying the product, issues may arise that require a quick response from the company. Ikea provides one in the form of a mail-in service that resolves issues.

#7 Superior image: The brand has garnered a great deal of goodwill among consumers due to its superior products and services.

Ikea Weaknesses:

#1 High price: Ikea’s strengths are also seen as weaknesses by some people who think that too much money is spent on marketing and advertising the brand’s image. This is not good for clients who can only afford low-priced but quality products.

#2 Too much emphasis on image: This is another weakness of Ikea that has to do with the company’s image. While it has great brand recognition, customers may be expecting more from the company based on its name and reputation.

#3 Limited capacity: Ikea sometimes struggles to meet the demand for its luxury brands. While this can be attributed to most products, some customers complain of waiting too long for the delivery of goods.

#4 Limited product line: Ikea’s product range is extremely limited, with products that may not appeal to all customers. Some people may not be interested in certain things, and Ikea has no products for them. Other stores have a much broader range of products.

#5 Limited retail outlets: Ikea has limited retail outlets which are mainly focused on metropolitan areas. This means that the company has less reach among low-income customers who cannot travel long distances in order to get their furniture or home appliances.

#6 Discontinued products: Ikea has a limited product line and sometimes discontinues some of them. While this is good for inventory control, it can be frustrating for loyal customers looking for specific items.

#7 Limited brand image: The company established a strong identity with the younger generation. However, this is not so much the case with seniors, who are the prime potential clients for middle-aged people looking to furnish their homes.

Ikea Opportunity:

#1 Brand strength: Ikea has a very strong brand identity that it can use to drive sales. The company may have lost some of its appeal among the older generation, who may have grown up with other brands but still know how to appreciate a good product.

#2 New product development: The company is constantly developing new products to meet its customers’ demands. This allows it to seize market share from competitors who do not meet customer needs.

#3 Brand Reach: The Ikea brand can be developed in order to capture a niche market. The company has a good understanding of what its customers want, and it can meet their needs with the same quality products as ever and extend its reach into new markets.

#4 Customer loyalty: Customers sometimes become so loyal to the brand that they are willing to spend more than they originally planned just because they trust the brand and want to support it. This represents an opportunity for Ikea to increase prices without losing clients or customers.

#5 Developing new products and marketing: This is one of Ikea’s strengths that it can use to its advantage. The company can develop new products and marketing them at higher price points but still maintain loyal customers. This is an opportunity for the company to create high-end brands with more intimate appeal and target a particular clientele.

#6 Brand perception: The brand image of Ikea can be leveraged to build a good reputation among its competitors who may not even know about it. This is another opportunity for Ikea to gain a reputation in the eyes of its competitors who may have their own good brands.

#7 Good reputation and differentiation: This is an opportunity for Ikea to grow its market share within niche areas such as care homes, developing a good reputation and differentiation from other market substitutes. The company can develop products that can be sold only on its website and serve customers locally in stores.

#8 Customization of products: This is one of Ikea’s strengths that can be leveraged by creating more customer-friendly products and services. It can also be used to spread its retail network across the country so that even low-income people can access household necessities without having to spend on fuel and transport costs.

#9 Brand awareness strength: This is another opportunity for Ikea to increase brand awareness among its loyal customers. It also has the potential to grow abroad yet keep its image at home, especially in terms of prices. This represents a very good opportunity for the company to maintain its status quo while growing its market share among some niche markets.

#10 Reputation: This is one of Ikea’s strengths that it can use to increase brand recognition and persistently grow in the market. The company has a reputation for good quality products and customer service, which are both definite advantages.

Ikea threats:

#1 Recession: Ikea is very vulnerable to fluctuations in the economy. A recession can severely impact its sales and have a negative impact on all aspects of its business, including operations, finances, and brand image.

#2 Competition: Ikea is in a highly competitive market and is more often than not up against some of the world’s biggest brands that offer better products and services at lower prices. It is the only major furniture retailer in Europe to have its own distribution chain and retail outlets inside its shops.

#3 Innovation: The Ikea brand may face challenges in maintaining its place in the market. It has been able to survive against strong competition, but it could face difficulties against new entrants who offer even greater value and product quality. Ikea could also lose market share if it ceased to develop new products that maintain its appeal.

#4 Better Rivals: The Ikea brand has to compete with other retailers such as B&Q and DIY chains. However, the company has already faced challenges from these companies and has overcome this by offering even better value for money compared to rivals.

#5 Target markets: Ikea’s target markets are primarily middle-income countries and emerging markets where there is greater competition in the furniture retail sector. Ikea is also entering markets in North America and Asia, where it faces new competition. The company will have to work hard to establish its reputation and brand awareness in these markets.

#6 Inflation & economic factors: Ikea has high exposure to economies with high inflation rates. An increasing number of developing economies suffer from high inflation rates, which could affect product pricing. This could reduce demand for the products and pose a challenge for the company’s business growth.