COLLEGE OF ENGINEERING

MASTER OF SCIENCE IN ELECTRICAL AND ELECTRONICS

ENGINEERING WITH MANAGEMENT
(CEEE770)

STRATEGIC MANAGEMENT (EEM732)

GROUP ASSIGNMENT:
Case Study of IKEA

PREPARED BY:
DALALIN MAYAMIN BINTI SHAFIE (2023330565)
MOHD HAZIM BIN ABDUL MANAF (2023770907)
MUHAMMAD HAFISZAN BIN MOHD AKHIR (2023761495)
ARZLIE BIN AMIR (2023911231)

PREPARED FOR:
DR SAMSUDIN B WAHAB

SUBMISSION DATE: 4 Nov 2023

 IKEA: Revolutionizing the Furniture Retail Industry
Dalalin Mayamin Binti Shafie, Mohd Hazim Bin Abdul Manaf, Arzlie Bin Amir, Muhammad
Hafiszan Bin Mohd Akhir
Universiti Teknologi MARA Cawangan Pulau Pinang
13500 Bukit Mertajam Pulau Pinang
Abstract: IKEA is a well-known international retailer of furniture and home items that has become
well-known throughout the world for its distinctive business strategy, reasonable prices, practical
designs, and dedication to sustainability. IKEA was established in 1943 in Sweden and has since
expanded to operate in many nations, ranking among the biggest furnishing merchants worldwide.
The secret to the business's success is its ability to provide ready-to-assemble furniture and home
accents, which saves consumers money by letting them transport and construct the goods
themselves. IKEA has demonstrated its commitment to sustainability by using renewable
resources, reducing waste, and supporting environmental issues. The company's marketing
tactics, which are distinguished by creative advertising campaigns and captivating in-store
encounters, add to its appeal. IKEA's commitment to satisfying its customers' changing
requirements and preferences is seen in its continuous growth and product diversification. With
its distinctive business model, creative marketing approaches, and dedication to sustainability,
Swedish multinational furniture retailer IKEA has revolutionized the furniture retail sector. This
case study explores their remarkable success story and looks at IKEA's main strategies, the
challenges it has encountered, and their impact on the world market.
Keywords: IKEA, Strategic Management, Supply Chain, PEST analysis, SWOT analysis

1. INTRODUCTION The company strives to use renewable materials,

minimize waste, and promote energy efficiency in its
operations. Additionally, IKEA has implemented
IKEA is a multinational furniture and home goods
various initiatives to support social and cause of
retailer founded in Sweden in 1943 by Ingvar
environmental, such as investing in renewable
Kamprad, started as a small mail-order business
energy and supporting local communities. In terms
selling pens, wallets, and picture frames. Over the
of marketing, IKEA is known for its innovative and
years, it evolved into a global powerhouse in the
creative advertising campaigns. The company
furniture retail industry, known for its affordable and
emphasizes the idea of creating a better everyday
stylish products. It has become one of the world's
life for its customers through well-designed and
largest furniture retailers, known for its affordable
affordable products. IKEA stores are designed to
and functional products. The company operates in
provide a unique shopping experience, with displays
numerous countries and has a strong presence
showcasing various room settings and solutions.
globally. One key aspect of IKEA's success is its
unique business model. The company designs and IKEA's vision is to create a better everyday life for
sells ready-to-assemble furniture and home many people. This vision encompasses the belief
accessories, allowing customers to transport and that everyone deserves access to well-designed,
assemble the products themselves. This approach functional, and affordable home furnishings and
helps reduce costs and enables IKEA to offer solutions. IKEA strives to make a positive impact on
competitive prices to its customers. IKEA also people's lives by offering products that improve their
focuses on sustainability and environmental everyday experiences and contribute to a more
responsibility. sustainable and inclusive world.
IKEA's mission is to offer a wide range of well-
designed, functional, and affordable home
furnishing products that meet the needs and
aspirations of people around the world. The
company aims to provide solutions that enable
customers to create a comfortable and personalized
home environment. IKEA is committed to
continuously improving its products, operations, and
services to ensure sustainability, affordability, and
accessibility for all. By embracing innovation,
efficiency, and social responsibility, IKEA seeks to
inspire and enable people to live a better life at
home.
The objective of IKEA is to provide affordable and
well-designed furniture and home goods to a wide
range of customers, while also promoting Figure 1. IKEA revenue 2001 to 2021
sustainability and environmental responsibility. The
company aims to offer functional and aesthetically In a Forbes 2022 study, IKEA ranked fourth in the
pleasing products that enhance the everyday lives retail category and 40th overall in the list of Most
of its customers. Additionally, IKEA strives to create Valuable Brands. The report made clear how highly
regarded IKEA is because of its dependability and
a unique shopping experience through its innovative
transparency with its customers. The recent year's
store layouts and displays. By continuously percentage increase in its value indicates that its
expanding its product range and global presence, customers have a strong sense of preference and
IKEA seeks to meet the evolving needs and trust shown in Figure 2.
preferences of its diverse customer base. Ultimately,
the objective of IKEA is to be a leading global retailer
that combines affordability, quality, sustainability,
and customer satisfaction.
A decade's worth of IKEA's annual revenue, from
2001 to 2021, is shown in Figure 1. A company's
profitability attracts investors since increased
revenues translate into more shares and dividends.
On the other hand, having shareholders benefits the
company because the invested funds may be
utilized to fund operations. According to Stein, the Figure 2. The World’s Most Valuable Brands 2022
mutually beneficial relationship between the
company and its investors creates an opportunity for Katie Thomas of the Kearney Consumer Institute
investments to increase significantly, a sign of a said in a Danziger (2021) study that "people are
successful business [1]. As it gives information looking for and still desire institutions that strive for
about the company's financial situation and potential the greater good." Companies that have
successfully attracted and gained the trust of their
for profit, the ability of the business to generate
clients are those who have chosen the appropriate
income is essential to the interests of its message that aligns with socially conscious values
shareholders. and is dependable, truthful, and open [2]. Even more
so, those founded on trust can use this to their
advantage to improve customer relationships and
gain a competitive edge. The act of continuously
demonstrating to the public that a company's ideals
and actions are aligned is known as brand image.

2. GENERIC STRATEGY USED IN IKEA

IKEA utilizes a combination of generic strategies to

maintain its competitive advantage in the furniture
retail industry. These strategies include cost
leadership, differentiation, and focus.

IKEA is well-known for its cost leadership strategy.

The company focuses on offering affordable
products to a wide range of customers. By
leveraging economies of scale, efficient supply
chain management, and flat-pack packaging, IKEA
can keep its production and operational costs low. Figure 3.IKEA Group Store Worldwide
This allows them to offer competitive prices while
maintaining reasonable profit margins. Numerous While IKEA emphasizes cost leadership, it also
merchants are engaged in a direct pricing war, and differentiates itself through its unique product design
IKEA is directly competing with numerous and customer experience. The company offers a
businesses that import goods from China. wide range of well-designed and functional furniture
Customers now have a lot of options and choices, and home goods that cater to various customer
which gives them a lot of bargaining power because preferences and lifestyles. IKEA's products often
they have more options. feature innovative solutions for space-saving,
organization, and sustainability. Additionally, the
Customers themselves have a significant amount of company invests in creating inspiring and interactive
influence over IKEA's product range and strategy. store layouts, where customers can explore room
For instance, as the history records, IKEA created settings and find design inspiration. IKEA stores are
the idea of "flat packaging" at the request of designed to provide an immersive and inspiring
customers to make it more convenient for them. shopping experience. Customers can explore fully
According to Wire Business, the improvement in the furnished showrooms, interact with products, and
hospitality industry and ongoing progress in visualize how they would fit into their own homes.
commercial and residential real estate projects have The layout encourages customers to spend more
helped the economy, which has increased demand time in the store, increasing the likelihood of making
for furniture [3]. additional purchases.

Additional reasons that have fuelled the market's IKEA also employs a focus strategy by targeting
rise include the rising demand for upscale and high- specific customer segments. The company identifies
end furniture for 8 investments and infrastructure and understands the needs of different customer
improvements. IKEA will continue to grow regionally groups, such as young professionals, families, or
because of growing customer demand, the IKEA students, and tailors its product offerings and
Group has a total of 280 stores in 26 countries marketing efforts accordingly. This allows IKEA to
illustrated in Figure 3. With a total value of over € 82 effectively meet the specific demands of these
billion in 2008, the European furniture industry alone segments and build strong customer loyalty.
produces half of all furniture produced worldwide.
The worldwide furniture market has experienced By combining these generic strategies, IKEA has
exponential growth due to its strong demand and been able to establish a strong market position and
fast-paced business, with a valuation of a whopping maintain its competitive edge in the furniture retail
$637.26 billion in 2021. industry. The company's focus on cost leadership,
differentiation, and customer segmentation enables
it to offer affordable, well-designed products while be influenced by economic downturns or fluctuations
appealing to a wide range of customers. in consumer spending patterns.
2. SWOT ANALYSIS
In conclusion, IKEA's strengths and global presence
SWOT analysis is a great way to understand its have made it a successful company, but it also faces
strengths, weaknesses, opportunities, and threats. challenges in terms of quality, competition, and
IKEA has a strong brand reputation and a wide maintaining its brand image. However, with the right
range of affordable and stylish furniture options, strategies, the company can overcome these
making it one of the leading furniture retailers in the weaknesses and capitalize on its opportunities for
world. Ikea’s business model of offering self- growth.
assembled furniture allows for cost savings, which
are passed on to customers in the form of 3. PESTEL ANALYSIS
competitive prices. IKEA has made significant
efforts to promote sustainability, using renewable a) Political Factors:
materials, reducing waste, and investing in IKEA operates in various countries, and it must
renewable energy. Additionally, IKEA stores are comply with different government regulations related
designed to provide an immersive and interactive to labor laws, product safety standards, and
shopping experience, with room displays and a environmental regulations. Changes in trade
layout that encourages exploration which leads to a policies, such as tariffs or trade agreements, can
unique shopping experience. impact IKEA's supply chain and international
Moving on to weaknesses, IKEA has faced criticism operations. Political instability in certain regions can
for its low-quality products and complicated affect IKEA's ability to operate smoothly and expand
assembly instructions. While the self-assembly into new markets.
model helps reduce costs, it can be a challenge for b) Economic Factors:
some customers who may find the assembly
process time-consuming or difficult. IKEA's products Second, IKEA's performance is influenced by
are typically designed with a focus on functionality factors like economic growth, inflation rates, and
and affordability, which may limit customization consumer spending patterns in the countries where
options for customers seeking more unique or it operates. Fluctuations in exchange rates can
personalized furniture. This has tarnished its impact IKEA's costs, pricing, and profitability,
reputation and resulted in a decrease in customer especially since it sources products from various
satisfaction. Moreover, the company heavily relies countries. IKEA's target market consists of
on its European suppliers, which may lead to quality consumers with different income levels, and
control, supply chain disruptions, or labor issues and changes in disposable income can affect their
affect their timely delivery. purchasing power.
In terms of opportunities, IKEA has the potential to c) Social-cultural Factors:
expand its presence in emerging markets such as
Thirdly, IKEA needs to consider factors like
China, India, and Brazil. These markets have a
population growth, age distribution, and household
growing middle class and a high demand for
sizes to tailor its product offerings and marketing
affordable furniture. Furthermore, with the rise of e-
strategies accordingly based on the demographic
commerce, IKEA can increase its online presence
trends.
and reach a wider customer base.
Changing consumer preferences for sustainable
Lastly regarding the treats, IKEA faces competition
products, convenience, and customization influence
from both traditional furniture retailers and online
IKEA's product development and marketing efforts
retailers. This can lead to a decrease in market
and commitment to social responsibility and
share and profits. Additionally, the company may
sustainability aligns with the growing importance of
face challenges in maintaining its sustainable and
ethical and environmentally friendly practices
environmentally friendly image, as it continues to
among consumers.
expand globally. IKEA's sales and profitability can
d) Technological Factors: 1. Expansion and Market Saturation: IKEA has
already established a strong presence in many
Moreover, IKEA can leverage technology to countries, but expanding into new markets while
enhance its operations, supply chain management, avoiding market saturation can be a challenge. The
and customer experience, such as through online company needs to carefully analyze market
shopping platforms and smart home solutions. For potential, and cultural differences, and adapt its
instance, the adoption of automation and robotics in offerings to meet local preferences.
manufacturing and warehousing can impact IKEA's
production processes and workforce requirements. 2. Sustainability and Environmental Impact: While
Utilizing data analytics can help IKEA gain insights IKEA has made significant efforts to promote
into customer behavior, optimize inventory sustainability, it faces ongoing challenges in
management, and personalize marketing efforts. reducing its environmental impact. This includes
finding ways to further reduce waste, increase the
e) Environmental Factors: use of renewable materials, and improve energy
IKEA's focus on sustainability, renewable materials, efficiency throughout its supply chain.
and energy efficiency aligns with increasing 3. Supply Chain Management: IKEA's global supply
environmental awareness and regulations. IKEA chain is complex, involving numerous suppliers and
aims to reduce its carbon emissions and promote distribution centers. Ensuring efficient and
renewable energy sources, which can positively sustainable operations while maintaining quality and
impact its brand image and appeal to cost-effectiveness is crucial. Managing logistics,
environmentally conscious consumers. IKEA's inventory, and supplier relationships requires
efforts to minimize waste and promote recycling ongoing attention and optimization.
align with growing concerns about waste
management and circular economy practices. 4. E-commerce and Digital Transformation: With the
rise of e-commerce, IKEA needs to adapt its
f) Legal Factors: business model to meet changing consumer
IKEA's designs and trademarks need legal preferences. Enhancing its online presence,
protection to prevent infringement and maintain its improving the user experience, and integrating
brand identity. IKEA must comply with consumer digital technologies into its operations are essential
protection regulations regarding product safety, for staying competitive in the digital age.
warranties, and fair advertising practices. IKEA 5. Talent Management and Employee Engagement:
needs to adhere to labor laws, including minimum As a large organization, IKEA must effectively
wage requirements, working hours, and employee manage its workforce and ensure employee
rights, in the countries where it operates. engagement. Attracting and retaining top talent,
It's crucial to remember that the PESTEL analysis fostering a diverse and inclusive workplace, and
framework is merely one tool for assessing external providing opportunities for growth and development
factors [4]. By considering these factors, IKEA can are critical for maintaining a motivated and skilled
proactively identify potential risks and opportunities, workforce.
enabling effective supply chain planning and 6. Social and Political Factors: Operating in multiple
decision-making. countries means IKEA must navigate various social,
cultural, and political factors. Adapting to local
regulations, addressing social issues, and managing
4. STRATEGIC MANAGEMENT ISSUES public perception are important considerations for
the company's long-term success.
One strategic management issue that IKEA faces is
maintaining its competitive advantage in the global As many issues have been encountered at IKEA,
market. As a well-known brand, IKEA must however, this paper only focuses on talent
continuously innovate and differentiate itself from management and employee engagement issues.
competitors to stay ahead. This involves addressing
several key challenges:
5. DISCUSSION Moreover, a lack of manpower can also lead to
safety concerns. With a high flow of visitors, it is
Talent management and employee engagement are crucial to have enough staff to ensure the safety of
critical factors in the success of any organization, customers and prevent any accidents or injuries. If
and IKEA is no exception [5]. However, like any there are not enough staff members to monitor the
other company, IKEA also faces challenges in these store, it can put both customers and employees at
areas. One issue is the retention of top talent. With risk.
its global presence and strong brand image, IKEA
attracts a large pool of talent. However, retaining top In conclusion, a high flow of visitors can certainly
performers can be a challenge for the company. The cause problems at IKEA if there is a lack of
high turnover rate can be attributed to a lack of manpower to handle the influx. It is essential for the
career growth opportunities and a competitive job company to address this issue and find ways to
market. This not only affects the company's improve. Based on the challenges faced by IKEA in
productivity and performance but also adds to the talent and employee management, this paper offers
cost of hiring and training new employees. the following recommendations and suggestions to
address the issue of a high flow of visitors leading to
Another issue is diversity and inclusion in the problems caused by a lack of manpower to handle
workplace. IKEA has been criticized for its lack of the influx at IKEA.
diversity in its workforce, especially in leadership
positions. This can lead to a lack of diverse 6. RECOMMENDATION
perspectives and hinder innovation and decision-
making in the company. Moreover, it can also result The issue of a high flow of visitors causing problems
in a lack of representation and inclusivity for due to a lack of manpower at IKEA is a pressing
employees from underrepresented groups. concern that needs to be addressed and
Employee engagement is also a concern at IKEA. implemented in several solutions.
Due to the company's flat-pack concept, employees a) Increase staffing levels: Hire additional
are often required to work long hours and perform employees during peak hours or days to ensure
physically demanding tasks. This can lead to sufficient manpower to handle the increased number
burnout and low morale among employees, which of visitors. This can involve hiring temporary or part-
can ultimately affect their productivity and overall time staff to meet the demand.
satisfaction with their jobs.
b) Cross-train employees: Provide training to
A major global issue that IKE faces is a high flow of existing employees across different departments or
visitors IKEA can certainly lead to problems if there areas within the store. This allows for flexibility in
is a lack of manpower to handle the influx. The first reallocating staff to areas experiencing high traffic,
issue that arises from a high flow of visitors is long ensuring that customer needs are met efficiently.
wait times. With a limited number of staff, customers
may have to wait longer to receive assistance or c) Implement technology solutions: Utilize
check out their items. This can lead to frustration and technology to streamline processes and reduce the
a negative shopping experience, potentially need for manual intervention. For example, self-
resulting in a decrease in customer satisfaction and checkout kiosks can be introduced to expedite the
loyalty. payment process, reducing the burden on staff.
Another problem that can arise is a decrease in store d) Optimize store layout: Analyze the store layout
efficiency. With many customers, it can be and flow of customers to identify bottlenecks or
challenging for a limited number of staff to keep up areas of congestion. By reorganizing product
with restocking shelves, maintaining a clean store, displays or creating separate pathways for different
and providing timely assistance to customers. This sections, the movement of visitors can be better
can ultimately affect the overall shopping experience managed, reducing the strain on available staff.
and may result in a decrease in sales.
e) Improve customer communication: Enhance
communication channels to provide visitors with
real-time updates on wait times, available
assistance, or alternative shopping options. This can monitoring of market trends, consumer preferences,
be done through digital signage, mobile apps, or in- and competitor strategies will also be crucial for
store announcements, ensuring customers are making informed strategic decisions. Additionally,
informed and can make informed decisions. fostering a culture of innovation, collaboration, and
continuous improvement within the organization will
e) Implement crowd management strategies: help IKEA stay agile and responsive to changing
Develop and implement crowd management market dynamics.
strategies to ensure a smooth flow of visitors. This
can involve assigning staff to specific areas to guide It's critical to assess pricing tactics to strike a
customers, managing queues effectively, and balance between market reach and profitability.
implementing crowd control measures during peak Finally, IKEA strategy management serves as a
times. valuable case study for businesses aiming to
achieve long-term success through innovation,
f) Collaborate with external resources: Explore customer-centricity, and effective execution.
partnerships with local agencies or organizations to
provide additional manpower during peak periods.
This can involve collaborating with temporary
staffing agencies or engaging with community REFERENCES
organizations to source additional support. [1] Stein, K. (2018). “Mutualism: Reimagining the
By implementing these solutions, IKEA can better Role of Shareholders in Modern Corporate
manage the high flow of visitors during peak times, Governance” Remarks at Stanford University. U.S.
ensuring a positive customer experience while Securities and Exchange Commission.
minimizing the impact of the lack of manpower. [2] Danziger, P. (2021). “Brand Trust Is Built On The
Cause Consumers Care Most About Themselves”.
Forbes
5. CONCLUSION
[3] Business Wire. (2022). Global Furniture Market
In summary, IKEA's success can be attributed to its (2022 to 2030) - by Type, Product Type, Material
unique business model, cost leadership, immersive Type, End-use, Distribution Channel, and Price
store experience, and commitment to sustainability.
By continuously adapting to changing market [4] Frue, K., & About The Author Kiesha
dynamics and customer preferences, IKEA has FrueKiesha Frue is a freelance writer and editor
remained a dominant player in the furniture retail with a love for health. (2020, September 16).
industry. The case study of IKEA serves as an SWOT Analysis Case Study of Apple Inc. PESTLE
inspiration for businesses seeking to revolutionize Analysis.
their industries through innovation, customer-
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(2023), "Internal communication and employer
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branding within a humanistic model – a case study
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