Running Head: IKEA CASE 1

IKEA CASE
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Table of Contents

Case Summary.................................................................................................................................2

Problem definition...........................................................................................................................2

Alternatives......................................................................................................................................3

Criteria.............................................................................................................................................3

Analysis...........................................................................................................................................3

External Analysis.........................................................................................................................3

Internal Analysis..........................................................................................................................6

Alternatives Analysis...................................................................................................................7

Decision...........................................................................................................................................9

Implementation Plan......................................................................................................................10

References......................................................................................................................................11
Running Head: IKEA CASE 3

Case Summary

This case discuss the sustainability in the IKEA about the management of wood portfolio

and the growth plan. Currently company set goals of achieving EUR50 billion sales and focus on

sustainability plans through working on the value chain. Especially centered on wood. IKEA is a

multinational organization, founded in Sweden in 1943 that manufacture and sells ready-to-bring

together furniture, appliance, and small motor automobile and domestic accessories. It’s the

world’s biggest furniture store seeing that January 2008. “To offer a wide variety of well-

designed, functional domestic providing merchandise at charge at low prices so that many people

as viable will be capable of have enough money with them” is their business idea. The company

is famous for its cutting-edge designs for appliances, furniture, and it’s indoors layout work,

which often related to the green concept. Besides, the corporation is well-known for its interest

to operation details, cost cutting and non-stop product development. Nowadays, IKEA owns and

performs in 373 shops in 47 countries. In addition, IKEA is a value-driven corporation with the

passion for lifestyles at home. Its imaginative and prescient is to develop and improve lifestyle of

people. The main financial principle of the IKEA Group is to grow by using their personal asset.

Problem definition

IKEA was facing huge challenges for wood supply chain and company aim to minimize

the transportation cost. IKEA management was willing to achieve the sustainability goals in

order to reduce the cost and achieve effectiveness. Basically IKEA was held accountable for the

Strategic sustainability issues along with that Customers were also focusing on these issues.
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Alternatives

1. Owning More Forest

2. Driving higher procurement targets and standards

3. Use more Recycling products

4. Use more Recycled wood

Criteria

To measure and analyze the alternatives, we would analyze based on the future

sustainability objectives, results generated by each alternatives, and overall IKEA competitive

positions.

Analysis

We will do analysis in two parts first I will do the analysis of the provided alternatives and along

with that I will do the IKEA’s internal and external situational and environmental analysis

External Analysis

Opportunities

• IKEA present business strategy to double its sales by 2020 at the lower cost. It could be

done through expansion. IKEA is currently operating in 47 countries only. It is comparatively

low in numbers in comparison to how well company is performing.

• IKEA could adapt the e-business model to achieve its business strategy. (Frue, 2018)

• The “Green” business model of IKEA has a huge awaiting opportunity in the context of

attracting the customer for those who would like to buy environmentally friendly products.

(Unknown, SWOT Analysis of IKEA, n.d.)

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Threats

• IKEA’s low cost strategy with maximum sales could be copied by rivals, which may

leads the company to face huge losses. To avoid this company needs to be continuously

innovative to meet/achieve their target/goal.

• Increasing cost of raw material would increase the manufacturing cost of product. Which

is threaten for IKEA to achieve its business strategy. (Dudovskiy, 2019).

Competition Analysis

The Competitors evaluation of Sustainability at IKEA Group appears at the opened

and close competition within the companies that it acts in.

 This includes a described analysis of their moves and the way those would have

an effect on the destiny techniques of Sustainability at IKEA Group.

 It includes searching on the current market % of the company and its rivals.

 It ought to check the marketing mix factors of rivals, their supply chain, human

capabilities, financial performance etc.

 Additionally it should check at the potential possibilities and threats

that those rivals pose on the market.

Five Forces Model

Bargaining Power of Suppliers

The bargaining power of suppliers are low because there is fine number of suppliers which

limits the bargaining power of suppliers. The switching cost for IKEA is low that means that

IKEA can switch easily. But if suppliers deny to supply raw material its will be difficult for
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IKEA to manage the situation. To avoid this IKEA bound its suppliers in a contract named

IWAY.

Bargaining Power of Buyers

While the bargaining power of customers is irrelevant for IKEA, they keep some sizeable

influence that’s why there may be a lot recognition on attracting and retaining the customers.

Except huge competition, technological boom has delivered this alteration about. The poise is

now turned in the favor of the customers.

Threat of New Substitute

The threat of new substitute for company is low. One of the reason is brand image and an

IKEA has successfully establish reputable brand image globally. The strategies of IKEA such as

lower cost, innovative design, people and positive planning makes it differentiated in the

competitive market. (Pratap, 2018)

Threat of New Entrant

The threat of new entrant is moderate too low to snatched the market share. They can

enter the market with small scale but won’t affect the business of IKEA. To develop brand image

in a competitive market consume time and huge amount of investment which won’t affect the

IKEA international market image.

Entry of competitive rivalry

Entry of rivalry is moderate. The competition of market share is not that much in

comparison to other industries but still IKEA had face huge competition to retain in the market

with good market image.

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Internal Analysis

Resources

In terms of resources IKEA plans to develop energy and resources independently, IKEA

Group's has relatively boost the use and availability of timber from greater sustainable source.

End of 2013, 32.4% of IKEA Group's wooden use become procured from sustainable source.

And the organization deliberate to reach 50% via 2017 and 100% by using 2000, long time

concern is expected within the future. For energy independence, IKEA enterprises has invested

1.5 euro billion to sustainable energy like wind farm, solar panels and biomass infrastructure.

This investment by IKEA would follow the long lasting strategy of power saving and

manufacturing the product at lower cost.

The IKEA’s strategy of low cost may leads the company towards the law suit. Because

company is already famous for its cheap quality product even the social media is full of the bad

comments on the product of IKEA. Even the customer got injured and some of them got died.

IKEA has great market share and faces huge market competition which makes it difficult for the

IKEA to sustain in the market.

IKEA innovates its product in totally different way and differentiate it with new designs

which attracts the customer towards itself. IKEA is famous for its inexpensive products which

make it self-affordable for low wage customers. Company finds the new way to design its

product with low cost and it is the true strength of the company.

Competencies and Capabilities

IKEA’s center competency is its unique design capabilities. This functionality results in

imparting customer’s terrific value for money. It is very tough for competition to compete with
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incredible layout at a completely low cost. Even if a competitor could suit IKEA’s design it

wouldn’t have the ability to meet it on price. This is due to the economies of scale of IKEA’s

worldwide distribution network. IKEA is expert in design differentiation which facilitates the

customer to use all kinds of products that company manufacture.

The idea of IKEA became a niche within the marketplace. In phrases of concentrating on

consumer pleasure IKEA established a real core competency. This simplistic and effective

strategy allowed IKEA to preserve a low-cost structure at the same time as focusing on

consumer’s preferences around the arena in a manner that has additionally long term profitability

(Abrhiem, 2016)

IKEA Constructing a low-cost commercial enterprise version that enables purchasers to

acquire the blessings of high-quality design products at a number of the lowest charges available.

Building sturdy brand fairness through specific promotions and pioneering advertising

campaigns that recognize diversity

Alternatives Analysis

Options Pros Cons

1. Owning More Forest  Direct employees will  Company need to

manage the invest more capital to

timberland through cover the cost.

sustainable resources.  This will also divide

 This will help the the management

company to trace the

Running Head: IKEA CASE 9

record of woods attention

 This will help IKEA  The lease term can

to acquire more FSC- exceed from the new

certified wood. harvest time of woods

 IKEA would be

responsible for the

land directly
2. Driving higher  It will help company  This would increase

procurement targets to get FSC-Certified the procurement cost

and standards raw material of IKEA.

 This will help to link  This option will take

FSC-certified more resources for

business and IKEA management

group

 Company will get

chance to gather the

reliable material
3. Using more  IKEA can get more  It can diminish

Particleboard Particleboard as consumers satisfaction

compare to Solid  Demand for

wood. particleboard is

 It will help IKEA to limited

reduce the use of solid  It will require

wood
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 The transportation of investments

the company would

also improve

 The final products can

be offered 20%

cheaper than the solid

wood made products

4. Use more Recycled  It is a cheaper offer to  It require high

wood opt for recycled wood investment

 Recycled wood is  Collection of used

cheaper than practical wood for recycling

board can be problematic.

Decision

Based on the analysis of internal, external and the options available I would go for the

option of using the mix of solid wood and particleboard. Because comparatively company can

achieve its sustainability goals by the end of 2022. The sustainability goals are important to

achieve for IKEA because company cannot afford to face any type of allegation in future. The

company can increase the chances of being sustainable and meet the goals. Along with that

we preserve discussing about 'sustainability' in current years. IKEA organization is a

worldwide commercial enterprise and it's far a difficult task to maintain sustainability all over

the world. We appreciate how good deal they challenge approximately sustainability

and assume their proposed alternatives can help maintain sustainability of timber supply chain.

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It might be great if other groups can observe their lead to keep sustainability to the environment,

the future improvement of environment may be better

Implementation Plan

 Proper planning and research is important in this area.

 Company should go for market research and consumers response over this particleboard

option

 Ikea should make the mix products and design their products accordingly in order to use

more of particleboard and achieve the sustainability goal.

 Company should gather investment and advertise to communicate the advantages of

using Particleboard products and promote green environment

 This will improve the image of the company.

References
Abrhiem, T. (2016, 01 2). IKEA’s Core Competencies: Low-Cost Business Model. Retrieved from linked

in: https://www.linkedin.com/pulse/ikeas-core-competencies-low-cost-business-model-talil-

abrhiem-ph-d-
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Dudovskiy, J. (2019, NOV 15). IKEA SWOT Analysis. Retrieved from RESEARCH

METHODOLOGY : esearch-methodology.net/ikea-swot-analysis/

Pratap, A. (2018, nov 15). FIVE FORCES ANALYSIS OF IKEA. Retrieved from notesmatic:

https://notesmatic.com/2017/10/five-forces-analysis-ikea/