IKEA offered value for money to their customers and this keep their customers coming back for more also resulting in an increase in its customer base. The company produce furniture on a large scale therefore they were able to take advantage of economies of scale and in turn reduce cost to their customers. Product differentiation allowed IKEA to be a leader in the furniture market and to penetrate new markets globally.

IKEA’s supply chain management ensured that the goods reach to the customers as and when they need it, IKEA use just-in-time to maximize the effects of its supply chain management. IKEA knows that not having their products on the market when and where the customer needs can only enhance and strengthen its position in the market and this prove to be a strength which give IKEA competitive advantage in the furniture industry.

To meet its objectives and goals IKEA by fulfilling the needs of its customer was also able to grow and expand its market base and supply to meet its demand. The company through strategic implementation was able to maximize its sales through customer service and satisfaction, giving customers value for money.

IKEA brand over the years have proven to be a brand of quality and standard, this brand have built a name and a reputation trusted and respected by its customer base this was a core competency of IKEA, its quality and service excellence. As a result of this IKEA was able be the furniture company in 1999 company ranking.

IKEA through its value chain continue to add value to its product and pass on this value to customers without increasing the price of its products and this type of service which was responsible for customers being loyal to IKEA and its brand and this was a major strength of IKEA. Through it brand IKEA was also able to penetrate new markets and to gain competitive advantage in these markets. Even with expansion of the company into others the continued to maintain and even raise its quality and standards to the growing demand of its customers.

Gregory G. Dess, G.T. Lumpkin, Alan B. Eisner (2007) Strategic Management Text and Cases, 3rd ed. , New York, McGraw-Hill Irwin states “…IKEA have developed unique, internally consistent, and difficult-to-imitate activity systems that have provided them with sustained competitive advantage. A company with a good strategy must make clear choices about what it wants to accomplish. Trying to do everything to do everything that your rivals do eventually lead to mutually destructive price competition, not long-term advantage.” (p10)

A Strength, Weakness, Opportunity and Threat (SWOT) analysis of the operations of IKEA, IKEA’s strength is its unique brand of product, its speed and efficiency in ensuring the its products are always made available when customers need them and at affordable prices. The design of IKEA’s products being light weight and modern in design appealed to the taste and needs of the potential customer. IKEA’s famous glossy catalogue allows customers to shop from the comfort of their homes through e-business which is ensures that products are delivered to customers in a timely and efficient manner their customers. Having had their products standardised IKEA is able to maintain globally the stand and quality of its products through quality assurance though the Swedish head branch allowed for power and authority in their sub-branches to be decentralized.

IKEA failed however, to modify its products to meet the changing needs of its customer base in instances the products proved to be too small and not practical for use. As such customers were not demanding the IKEA brand products. IKEA failed to use innovation, technology, research and development to further capitalize on its unique brand and this proved to be a weakness in the face of competition.

Opportunity presented itself for IKEA through its global perspectives; IKEA entered new and untapped markets and modified its products to satisfy the demands of its market. IKEA also implemented new strategies by gradually going global in the North American, Asian and Eastern European markets. IKEA diversified, standardised its brand and specialised in knock-down furniture manufacture. IKEA also focused its marketing strategy on capturing the younger target group. This would include students living at dormitories, single persons, single mothers and newly married without children.

The devaluation of the Swedish krona also poises an economic threat to IKEA since they had to pay higher sums in the USA market. This resulted in the increase cost to the customers, customers therefore refused to buy IKEA’s products.

One particular threat faced by IKEA was from companies entering the market and supplying knock-down furniture such as IKEA. IKEA face the threat of losing part of its market share and to its competitors which result in a decrease in the company’s market share.

However, through its resilience IKEA was able to convert its threats into opportunities, weakness into strengths through maximizing the potential of its human resources and its core competencies and strategic capabilities.

A PEST analysis is a Political, Economic, Social and Technological scan of the macro-environment in which an organisation operates; in this case it is IKEA.

Political factors or constraints IKEA can face are tariffs and taxes imposed by the various governments in the countries in which they operate. In the American market for example it was stated that the company took a longer time to be profitable. This could have been as a result to penalties placed on foreign own companies entering the American markets were they compete against American and locally own companies. Many legislations are implemented which allows for the domestic companies to have competitive advantage over global and international industries.

Economically the devaluation of the Swedish krona met that the company had to pay more krona for a US dollar. This met that the cost of foreign exchange would be more costly for IKEA, this would also impact on the cost of raw material, it distribution chain, labour at home at abroad would also be impacted on.

Economically IKEA was able to partner with suppliers who would be able to supply its raw material in bulk on a global scale at the lowest possible price and this allowed IKEA to pass furniture on to their customer at a lower cost than its competitor.

Socially IKEA can and have been consider to be a good corporate citizen as it relates to its stakeholders such as its employees, the environment , the community in which it operates. IKEA believes that taking care of its stakeholders goes hand in hand with doing good, sound business. http://www.ikea.com/ms/en_US/about (accessed 10/27/2010 at 2:10 p.m.) “IKEA works actively to reduce its impact on climate change and IKEA products must be produced under acceptable working conditions by suppliers that take responsibility for the environment.”

Technologically IKEA’s products lost its competitive edge; products were not measuring up to a market which was constantly demanding improved goods and services. IKEA’s products were less suited for its purpose and their customers started to move away from their product line and brand. By not changing its design and structure to meet the needs and requirements of a market which was consistently changing its taste IKEA market base was being lost to its competition in the traditional furniture market.

Technically however, IKEA has been able to be the first knock-down manufacturer of furniture therefore they have been able to enjoy first market advantage in its niche market.

Through its strategic capabilities IKEA have been able to remain a market leader and set a bench market of best practice from which other industries have followed. Through its innovative strategy IKEA was able to design a new and convenient way of buying furniture. Its research and development strategies further enhanced and maximized IKEA’s ability to meet and satisfy the needs of its growing market base. Customers have continued to remain loyal to the IKEA’s brand since they have put the needs of the market first.

IKEA have partnered, involved and engaged its customers in its product development. http://www.ikea.com/ms/en_US/about (accessed 10/27/2010 at 2:10 p.m.) “Our business idea is based on a partnership with the customer. First we do our part, which starts with our designers working with manufacturers to find smart ways to make furniture using existing production process.”