Situational Analysis: The most important external factor impacting IKEA is its relationships with suppliers. When the company first started out an was being boycotted, they reached out internationally to find high quality at low cost. This enabled them to create a nearly pure competitive supply market that continues to thrive today. New entrants come into the furniture business almost every day and must be something that management is always aware of. The existing rivalries are also very intense. IKEA must compete with discount retailers like Walmart and Target as well as boutique stores including Thomasville and Ethan Allen. Finding substitutes for purchasing new furniture is difficult at best, but there are markets out there for renting items as well as buying used furniture. IKEA also targets younger, hipper families that are starting out and may not have the purchasing power of more established, older ones. The political and economic factors at the time were very favorable to most industries, including furniture stores. Home purchases were at record levels (Data 360), which led to increased sales and market share for IKEA. Internally, IKEA took unique approaches in many areas to sustain their competitive advantage. Their value chain from supplier to end consumer sales always seeks a low-cost strategy. This allows parts of the same furniture piece to be made in China, Africa or Europe. Their flat-box shipping methodology saves them freight and shipping cost as well as the end consumer. They fully utilize their resources and senior management sticks to their core beliefs, but is always looking to improve. There are opportunities for IKEA to improve though. The corporate culture, although unique, does not appear to be very strong and they have been plagued with concerns regarding the quality of their end product.
Key Success Factors: In order for furniture retailers to succeed, they have to create an experience for the shopper. Whether it’s a discounter offering quick convenience and a low cost, or the boutique shop offering superior service and higher quality. They must know their customer and respond accordingly. Additionally, furniture is seen as an investment and must be not only fashionable, but long-lasting.
Strategies: At the functional level, IKEA has been very successful in create a competitive environment with their suppliers. This has allowed them to control cost more effectively and chose which company they are willing to work with