IS

Strategic Analysis, L5

Overwiew

  • IKEA Overview: Founded 1943 in Sweden; largest home furnishings company.

  • Revenue: €47.960 billion in 2022, 7.8% increase.

  • Products: 10,000 items, 422 stores in 50 markets.

  • Workforce: 222,520 employees (40,000 in production).

  • Store Visits: Over 1 billion annually.

  • Challenges (2022): Ecological sustainability, digitalization, shipping crisis (1,200% cost increase).

  • Price Increase: Global average increase of 9% announced by CEO.

Guiding Mission & Reason for Success

  • Mission: Enhance everyday life with affordable products.

  • Competitive Strategy: Prices 20-50% cheaper than competitors; franchise system with 11 partners.(through huge economies of scale)

  • Market Growth: Expected to rise from $579 billion (2023) to $873 billion (2030).

  • Global Focus: Shift towards deeper market penetration in key markets like China and India.(by reducing prices a lot & increase presence)

Outlook

  • Challenges:

    • Too slow online (compete with Amazon? Wayfair(/Ashleystores), Alibaba, local online competitors)

    • Prices too high in emerging markets

    • Environmentallly concerned customers(new sharing economy)/changing consumer habits(too far from citycenter)

    • Insecure/Volatile supply chains

Future Strategies:

  • Embrace?

    • omni channel experience

    • increasing prices

    • cooperate or compete with Amazon/Alibaba

    • Change locations/Focus on smaller stores

    • Adapt reputation

Strategic Analysis for the future: SWOT & TOWS Analysis

SWOT

  • Strength: integration of design, content, software, hardware

  • Weakness: chinese dependency, innovation leadership

  • Opportunities: AI, growth in services(apple pay, icloud,..)

  • Threat: losing market share with chinese middle class

TOWS

  • Matrix:

    • SO=invest in service leadership

    • WO=apple intelligence

    • ST=replace loss of chinese market with indian middleclass market

    • WT=diversify supply chain & manifucturing in india,vietnam,…

Execute options to a CA through a product/service strategy

Price/Benefit strategy clock(Bowman)

Define the competitive advantage which is where most of the customer value your product more than the majority of the competitors (reference offer). In terms of competitive advantage, you can go either cost advantage (same product at low cost) or differentiation advantage (superior product with a price premium) or hybrid.

  • Cost Focus (lower gross margins, unique cost structure, efficiency in organisational structure,..)

  • Low price leadership

  • Differentiation

  • Hybrid: can sometimes but really rarely have hybrids that achieve both(often disrupters in the market, like free)

  • Focused differentiation

Q1: differentiation through swedish design (selling a lifestyle)+low price(vertically integrated cost management)

Q2: SWOT

  • strengths=creative&frugal culture, hybrid leader, leading customer base&stores, profits to invest

  • weakness=latecomer digital skills, disposable furniture, dependent on European customers,

  • opportunities=growth city format across the world, store network facilitates omni channel, growth emerging markets

  • threats=very low-cost local competitors in E.M, digital competition, competitors offer third-party content/delivery services, lack of local sourcing

Q3: TOWS

  • Our version:

  • correction:

    • SO, invest in new omnichannel

    • WO, develop go-to platform for home furnishing

    • ST, reinforce hybrid advantage by scaling up local sourcing in USA/India/China

    • WT,use Alibaba in China, use large Western stores as ecommerce fulfilment centers OR invest in lowering prices, offering USA unique omnichannel experience