Ikea Case Anaylsis

...

In 1963, IKEA opened a store in Oslo, Norway, its first store outside of Sweden. In 1965 IKEA opened another store in Stockholm, Sweden. This was the largest IKEA store and covered 33,000sqm. The company introduced the self-serve concept and customers were provided information about the products on display through written material and information desks. There were no staff. That enhanced the shopping experience for some as there was no salespersons who were constantly urging customers to make purchases or sales personal having to meet assigned budgets. And Customers were given tickets for the goods they purchased and were asked to collect the goods at the delivery dockets. There was no door delivery service available and customers were asked to bring their own transportation. By 1974, IKEA expanded into more European countries, it had 10 IKEA stores in five European countries.

IKEA became highly successful in Germany where it opened its first store in 1974. The company realized the huge growth potential it had in Germany and expanded aggressively. By 1980, it opened 10 more stores in Germany. In 1975, IKEA entered Australia by opening a store in Sydney (there are eight stores now in Australia, and a ninth is set to open in North Lakes, north of Brisbane, by the end of 2016). IKEA continued to expand globally by opening stores in Vancouver, Singapore, the Canary Islands, Iceland, France, Saudi Arabia and Kuwait.

IKEA entered the USA in 1985 opening its first store in Philadelphia, Pennsylvania. By the year 1990, IKEA had 89 stores in 21 countries. IKEA also expanded its sources of supply to include countries like China. In its early days IKEA sourced most of its products from Eastern Europe, but as IKEA expanded, its dependence to Eastern Europe came down by 15% in 1990. In the 1990’s IKEA expanded into countries like Taiwan, Malaysia, Spain and China. In 1997 IKEA launched its website: http// www.IKEA.com where it provided its customers with an online product catalogue.

By 2016, IKEA operates 375 stores in 47 countries with 70% of its stores located in Europe. The best countries for IKEA are Germany and the U.S, which both represent 14% of IKEA Group sales. The retailer added 13 stores in 9 markets during 2015 with multiple store openings in China, France and Germany. IKEA received 771 million store visits, 36.3 billion in sales and offers roughly 9500 products.

One cannot dispute that Kamprad and IKEA entered the industry by way of finding avenues of approach that would enable him to side set the traditional Swedish furniture cartels arduous attempts to impede or block Kamprad’s efforts to acquire, store and distribute his – then stifled yet burgeoning and promising company’s furniture products. This avenue seized upon and utilized an alternative set of dynamics which included looking further away from the traditional locations where business collaborations between IKEA’s founder and the established cartel business concerns were not only obstinate but restful as well (de Kluyver & Pearce, (2014), p.102).

Kamprad is still around today, but he passes on the management to others. IKEA is the largest seller of furniture in the world. There is perhaps no other retailer on the planet that has moved its basic model into so many places with so much success. IKEA’s influence is really about its merchandising model, products, pricing, store siting, marketing, sourcing, and even its name.

---------------------------------------------------------------

Analysis: external environmental factors

There are many external environmental factors that can affect large global organizations such as IKEA. It is common for managers to access information about each of these factors and to examine them closely. The aim of this is to make smarter, informed decisions for the firm’s progress and future. The most common factors are political, economic, social and technological (better known as a PEST analysis).

It is important to clarify that a business has little or no influence within the PEST framework; however, they can develop strategies to help managers eliminate or at least to minimize the negative effects of these factors. Moreover, a PEST analysis can also shed light onto opportunities and provide a competitive advantage on various fronts for a company’s business model.

PEST analysis on IKEA and factors that influence their business model.

Political Factors

IKEA’S revenue can be greatly affected by the political situation in the current market and a wide range of political factors such as a government’s attitude towards the brand and political stability. IKEA has faced a series of issues on political grounds. For instance, in 2012, IKEA was forced to admit that the company had used prison labour in East Germany in the 70’s and 80’s as a form of cheap manufacturing. IKEA did offer a formal apology to all those affected, however the incident caused a significant political controversy around the globe about IKEA’s ethics. Allegations were also made against the founder Kamprad that he was an active recruiter for the Swedish Nazi group which sparked controversy with negative effects on the brand. Sales fell by 28% percent in 2012 when these events were made public.

Increasing globalization and protectionism, presents another challenge as well as an opportunity for IKEA. The greatest challenge IKEA faces will be to compete against unknown forces and to source the best quality/financially viable products from around the world. Joint ventures and partnerships have presented opportunities to enter the markets of emerging companies and to explore these new markets. However, the company has to be wary of protectionist policies of many host countries it operates in since there is a real risk that the countries may impose high tariffs on goods imported in an attempt to spur domestic production. Corporate and consumer taxes along with business litigation which differs from country to country are also other influencing factors,

Another noteworthy instance of the impact of political factors relates to IKEA’s doll by the name of Lufsig, which in Swedish is ‘clumsy’. Whist the translation of Lufsig into Chinese does not have any concerns, but the translation to the Cantonese dialect, Lufsig, sounds similar to an expletive. In 2013 a photo was taken of an incident whereby a protestor threw the IKEA doll Lufsig at Hong Kong’s chief executive, Leung Chun- Ying. This incident gained negative media attention and the Lufsig doll gained a symbolic status among the Cantonese people who were dissatisfied with the government