IKEA: People and Environment as Key Elements That Can Result Into Business Success in the Long Term

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Table of Contents

Summary of the case study
Key issue of the case study
Application of the business theory
Conclusion
Work cited

Summary of the case study

The case study relates to IKEA a retail firm that deals with home furnishing. The firm was established in 1943 and it is currently internationally recognised (‘SWOT analysis and sustainable business planning’ 77). It deals with a wide range of consumer products such as furniture and accessories. The firm also operates in the hospitality industry by establishing a number of restaurants, cafes and groceries. In its operation, the management of the firm have integrated various strategies such as franchising and electronic commerce. This has enabled the firm to operate effectively on an international scale.

The management of the firm appreciates the price sensitive nature of the customers. This has been incorporated in the operation of the firm through a low pricing strategy. The low price of the firm’s products has resulted into an increase in the number of customers who make their purchases at IKEA’s outlets worldwide. This culminates into an increase in the firm’s level of profits. For instance in 2008, the firm’s level of profit increased by 7%.

The case study also entails an evaluation of the internal an external environment of IKEA through a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). It also depicts the commitment of IKEA toward corporate social responsibility and customer satisfaction in its operation (‘SWOT analysis and sustainable business planning’ 77).

Key issue of the case study

The case study depicts IKEA’s sustainability plan to enable the firm thrive in business to 2015. In this plan, the management of the firm has prioritized people and environment as one of the strategies towards its economic success. This is integrated in the firm’s vision which involves creation of a better daily life for the people. To attain this vision, the management of the firm has integrated the concept of sustainability in providing solutions to the society.

The concern for the society enables IKEA to operate responsibly by making better use of energy and the raw materials. Through this strategy, the firm is able to operate efficiently thus attaining its economic goals. In addition, the firm’s operation impacts the society positively (‘SWOT analysis and sustainable business planning’ 77).

The SWOT analysis is used to analyze the firm’s commitment towards the environment and people.

Strengths

IKEA has attained a competitive advantage by ensuring that the products it supplies to the people are of high quality (‘SWOT analysis and sustainable business planning’ 78). The management is committed at ensuring that the quality of the firm’s product is maintained throughout the world. The quality of the firm’s products is enhanced by the firm using current technology in its production process.

Competitive advantage also arises from the management being cost conscious and pricing their products relatively low compared to the competitor. This is due to the fact that the management has incorporated the concept of bulk buying of raw materials. This enables the firm to negotiate on the price. The low price also arises from effective sourcing of the raw materials. In addition, the management ensures that minimal waste results in the process of production. This is by incorporating the concept of ‘smarter utilisation of raw material’. This is enhanced by increased use of the recycled waste in its production process and also to meet its energy needs across all its production process. The firm increased the use of renewable materials from a low of 71% in 2007, to a high of 75% in 2009.

Weaknesses

Control and reputation problem

IKEA faces a challenge of controlling the quality of the firm’s products as a result of the firm’s global scale of operation. This arises from the fact that the some of the host countries where the firm has established its plants do not have comprehensive quality control standards. The effect is that the reputation of the firm’s products is damaged (‘SWOT analysis and sustainable business planning’ 79).

IKEA faces a challenge in maintaining a reliable communication with its stakeholders such as the consumers. This is due to the firm’s global scale of operation.

Opportunities

Market developments

The consumers are developing a positive attitude towards a firm that is socially responsible. IKEA is committed towards ensuring that the firm’s operation results into minimal carbon footprints. This is the amount of carbon dioxide that is emitted from a particular activity (‘SWOT analysis and sustainable business planning’ 79).

Lifestyle trends

Currently, the economic situation has resulted into a financial strain for the consumers. This has resulted into consumers changing their consumption pattern. In addition, consumers are after the products of firm’s whose price is relatively low.

Threats

Increased competition

IKEA faces a threat from an increase in the number of firms entering the industry. Firms entering the household furniture industry are adopting the low pricing strategy. The result is that there will be an increase in the degree of rivalry amongst firms in the industry. Increased rivalry will lead into a reduction in the firm’s level of profitability.

Market demand

The demand for the firm’s product may be affected by social trends such as a reduction in the number of buyers venturing the housing market.

Application of the business theory

Through SWOT analysis, it will be possible for IKEA to identify the internal and external factors that would affect the firm’s effort to attain its sustainability plan. SWOT analysis will enable the firm to develop its weaknesses into strengths and also exploit the available opportunities.

Conclusion

The operation of a firm should not be focused at maximising the level of profits at the expense of the society. People and environment are key elements that can result into business success in the long term. This is due to the fact that the firm develops a positive image in the society.

Work cited

The times 100. “SWOT analysis and sustainable business planning”. 2009. Web.

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