Weaknesses Of Ikea

IKEA is a world famous furnishing company known for selling Scandinavian-style furniture and other home-based goods. The company has over 230 stores, with operations carried out in over 42 countries with well over 70 000 employees. The stores themselves can occupy 410 million shoppers per year. It is a Swedish based company built on the idea of offering a wide range of well-designed, functional home furnishing products such low prices, that a majority of people will be able to afford them. The IKEA group is currently solely owned by the INGKA Foundation through a holding company, unlisted on any stock exchange.

This paper aims to demonstrate a detailed description of the elements of ‘IKEA’ company based on its famous name in the furniture industry.

IKEA´s mission statement: IKEA offers a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible can afford them"

In IKEA’s history two different modes of entry were used. Both were met with big success and allowed IKEA to enter new markets very easily, and in a secure way.

IKEA Company was founded in 1943 by Ingvar Kamprad. The name of IKEA is originally formed from the first letter of the founder’s name and the names of the property and the village where he grew up. At the beginning, IKEA produced and sold simple things (such as pens, wallets, table, pictures frame, watches and jewellery) in the base of low price. The production of furniture in IKEA began during 1947 and in 1955 IKEA Company started to design its own furniture. Based on the company’s motto “Well designed and affordable quality furniture for everybody,” IKEA has been able to grow into fame company

The target group of IKEA is consumers with limited financial income. Therefore, this economic situation will impact and influence IKEA’s business due to a slow down consumer spending and income reduces.

IKEA send Swedish managers to all branches in the world to implement the IKEA Way to local areas.

Highly competitive market brings IKEA weaknesses such as magnitude of the global business that is or isn’t capable of managing stakeholders, product differentiation, suppliers’ issues of not abiding by IKEA Group Code (IWAY code) in to limelight. Other weaknesses of IKEA i.e. ineffective communication and information exchange with its consumers and stakeholders due to huge scale of business operations are also identified (Johansson et al., 2008).

IKEA has to acknowledge its weaknesses in order to improve and manage them. This can play a key role in helping it to set objectives and develop new strategies. IKEA’s weaknesses may include:

IKEA employs more than 1,000 designers around the world who operate under democratic design culture and apply the concept in practice on a daily basis. The company is putting in the effort to integrate this notion to all of its products. IKEA has developed the notion of democratic design which implies achieving an attractive form, quality, functionality and sustainability at a low price. It is consistently increasing the revenues of the business.

IKEA is short for Ingvar Kamprad Elmtaryd Agunnaryd, as the Swedish furniture corporation, which with more than 200 stores in over 30 countries (Chen et al., 2011). In 2011, IKEA had 23.5 billion euros in sales with 2.7 billion euros net income and 127,000employees worldwide (IKEA sustainability report, 2011). The company is known for being good at cost control and continuous product development, which allows keeping its prices competitive and continue its global expansion (Jonsson et al, 2010). In order to have a better understanding, this report will

At the outset, it may be useful to characterise IKEA in terms of the characteristics of demand (also known as the four Vs, see Slack et al. p 20). First, IKEA is clearly a high volume operation – as indeed most international retailers are – which lends to systematising operations but which implies capital intensive processes and therefore cost considerations will be crucial. Second, IKEA offers a large number of products (up to 14000 depending on the country/store) so there is high variety in the

IKEA established itself as the largest furniture retailer in Sweden by the early 1970s by reinventing the wheel of furniture manufacturing at that time. Majority of furniture manufacturers in Sweden produced expensive products with designs that were basic or passed down generation to generation, additionally other manufacturers stores where located in downtown congested areas. IKEA’s strategies which consisted of low cost low priced furniture, brave intricate designs, self-assembly,

IKEA aims to develop inexpensive products doesn’t mean to sacrifice its promise to consumers – “A better everyday life”. Instead of low quality product IKEA tends to deliver its mission by better purchasing management. IKEA spread its Sweden designed furniture to manufacture in developing countries to keep the lowest production cost. With more than 1000 suppliers over 55 countries, approximately 62% of purchasing is from Europe and around 34% from Asia. (5)

In contemporary business environment which is highly effected by globalisation and urbanisation, it is interesting to see how IKEA which has been going through successful changes in the past and dominated furniture industry for decades based on its low prices and customer oriented services, to take action after realising the importance of e-commerce and the changing lifestyle in modern society. Thus, this essay is going to discuss from what kind of change and why it has been conducted in the past, its lasting impacts on the ways of change in current business practices, and the analysis of the circumstance for the changes.