IKEA Company PESTEL and SWOT Analysis

Introduction

IKEA is the short form of the founder of the Company Ingvar Kamprad, Elmtaryd, the farm the fonder was brought up in, and Agunnaryd, the name of that location the Company is located. The Company is located in the Netherlands and deals with making and selling kitchen appliances, ready-to-assemble furniture, and many other Product and services that they offer to their customers. The IKEA organization was founded by Ingvar Kamprad on 28 July 1943 (Krenkova, 2020).IKEA company headquarters are located in Delft in the Netherlands. The Company is a retail industry. IKEA Company is a multinational company that functions across the world. As of April 2022, the organization has 466 IKEA stores in 63 countries (Vangeel, 2022). The Company was worth 41.9 billion euros in the year 2021; in the same year, IKEA made a profit of 1.579 billion euros which is an outstanding achievement(Yuzyk,2021). Below are some of the PESTEL and SWOT analyses of IKEA company.

PESTEL Analysis

PESTEL analysis is a mechanism businesses use to analyze political, economic, social, technological, environmental, and legal factors (Matovic, 2020) affecting business from outside, that is, external factors.IKEA is an international company with many problems and challenges affecting its Production. First, IKEA Company has branches in Asian countries, each with its own rules and regulations. Due to political differences and instability in some countries, IKEA Company has occurred profit loss in some countries, primarily Asian countries(Singh, Rao & Xuan, et al.,2021), where they mainly have political differences and war elapses. Also, political factors affect the IKEA process whereby some unfriendly governments make rules and regulations, making importing and exporting foreign goods very difficult. IKEA Company has no opportunity to agree to and follow the government’s regulations. On the other side, a good relationship with other governments enables the IKEA Company to invest in those countries and make a big profit. For example, some countries like India and china (Wu, 2020) have become more open to international investors. It has enabled IKEA Company to open more branches in those two countries and make good revenue from them.

IKEA Company is an international company influenced by how strong or weak the US dollar is in those countries (Cavallini & Benzi, 2022). When the US dollar is strong, the Company tends to lose more money because IKEA Company uses euro money in their Production. Also, it becomes an advantage when the US dollar is weak as the Company tends to make more revenue in those countries. The other economic challenge the Company has experienced is the 2007 recession (Peng, 2021) which made many people lose their job. It affected the IKEA Company as people started purchasing only basic needs, not luxury ones. For example, people may need furniture, dresses, mattresses, and other Product, but they would not upgrade them; this was a big challenge as the Company would make little revenue.

IKEA Company is also affected by social controversies and complaints, which is an international challenge (Rosetia, Leonardo &Fevita, et al. 2022). For example, IKEA Company was forced to remove same-sex couples from their magazine in Russia because homosexuality in Russia is considered a crime. It made other people from other countries complain a lot, and this was a big challenge. Also, IKEA removed women in Saudi Arabia, which was a big problem for the Company because the idea was not taken well by the people.IKEA company being an intentional company, does not know its customers well. It is a big problem as they tend to take some products to customers who do not need them. It makes the Company lose because customers do not buy their Product. The Company also got complaints from the people who ordered their Product online when delays in delivering the Product on time.

IKEA Company achieves more with the invention of new technology in their Production and digitalization (Maghazei, Lewis & Netland, 2022).IKEA customers use the Company website to know nearly branches and enable them to order IKEA products online, which is not achieved when using the paper method.IKEA Company uses digital platforms to let customers know when they get new offers, Products, and stores the Product is available worldwide. Using new technology in their Production, IKEA Company can produce more products that know the needs of their customers worldwide. It enables them to meet needs and satisfy their customers across the world. Also, IKEA Company is an international organization that is faced with legal cases such as death and harm accusations in some countries (Wulandari, Amanda, & Salim, 2022); this has become a being challenge as they must follow the laws and regulations of that country this has made them to experience significant loses as they handle those different cases.IKEA Company also has found itself in the hot spot as they are accused of producing poor Product that, when they fall, causes injuries and sometimes results in death.IKEA company also has started using renewable resources such as solar and wind panel as energy sources in their stores, enabling them to become environmentally friendly.

Swot Analysis

SWOT analysis is a tool that Companies use to help them identify the strength, weaknesses, opportunities, and threats that are facing the Company or any other business (Ahmaid, 2022). As an international company, IKEA has its strengths, weaknesses, opportunities, and threats. First, customer knowledge (Mohd, 2022) is the critical strength of the IKEA organization as the Company knows what its customers need and its purchasing power, which makes customers buy from its stores. Also, IKEA Company sold their Product at a lower price, thus making them sell huge Products and enabling them to make much profit. They also introduce new products to their customers with new designs, thus making customers attracted to their Products thus buying from them. Also, the Company comes up with innovations that help lower their production cost (Li, Hong, & Xue et al. 2016). It enables the Company to sell its Product to its customers at a lower price. The newest innovation includes coming up with new materials for Production and using the newest method that favors the environment for packaging, handling, and transporting their Product.

Another strength IKEA company has is having a good relationship with its suppliers (Fraguel &Nicolaidu, 2020). It has enabled the Company to order large quantities of Products at a lower price and good quality from their suppliers. It has made their Product cheaper than their competitors, thus gaining more customers. Also, IKEA Company has been able to brand their Product very well, and they are readily available in the market, thus creating more trust in their customers. The Company also diversified its Production and services; except for dealing with furniture products only, they also operate in restaurants, housing, and flats, making them more stable in the market.

The Company also has some weaknesses which affect them; first, they have negative publicity where they are being accused of poor treatment of their customers, questionable advertisement by the government of different countries where they are accused of going against the law and regulations of that country (Ferrel, 2021). It has led to a decrease in customers’ trust in their Product, thus leading to low revenue. The other main challenge they have has low-quality products and services. According to analysis realized by the UK customers insight report, it showed that IKEA customers are less satisfied with its product and service quality compared to the other customers buying from other stores in the UK. The Company also has a standard product brought by their low production cost. Standardized Products attract fewer customers, thus enabling their competitors a chance to offer better Products and services; this has become a big challenge for IKEA Company.

The Company has some opportunities to operate mainly in developed countries but not developing ones (Ahmad, 2022). There is an excellent opportunity for IKEA Company to open more branches in many other countries in the rest of the world so that they can increase their revenue and sustain their future growth. The opportunity the IKEA Company has is growing its online market and sales. They got over 870 million people who visit their website, thus giving them a chance to serve more customers in the future and make big profits from online sales. Another opportunity they have is the growing demand for grocery products in developed countries; thus, they got a chance to expand their grocery stores in those developed countries in their current retail stores.

The IKEA Company experience some threat, mainly from their competitors, whereby some companies, such as WALMART, TESCO, and ASDA got, similar Product; IKEA Company also Product are low cost, got well-managed supply chain and a big market as IKEA Company this creates big competition for the customers(Abdul,2022). The other challenge IKEA company faces is the growth of average consumer income. It is a process whereby people buy less low-price and low-quality goods, and few people are attracted to the Product, which is precisely what IKEA Company offers in their store that is a low-quality product at a low price, thus attracting few customers.

Below is a table trying to analyze the PESTEL and SWOT analysis of IKEA Company.

The following is a PESTEL analysis;

The following is a SWOT analysis;

Conclusion

From the above analysis, it is clear that IKEA Company has achieved much in the world market. It is the best furniture production company in the world. Also, their Product is unique, and customers like their Product.IKEA Company is one of the most stable Companies in the world market. Also, the Company has embraced new technology in Production, which has increased its Production.IKEA Company also has created more job opportunities for many people who work in their Company across the world. Furthermore, they also expire many challenges like being accused by governments of different countries of violating the rules and regulations that govern that country. They are also accused of harming their people, forcing them to spend a lot of money and energy in court when they are supposed to be concentrating on other beneficial production activities.

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