SWOT stands for strengths, weaknesses, opportunities, and threats associated with a business and it is one of the most effective strategic analytical tools in terms of business analysis (Baker and Hart, 2007). Strengths and weaknesses are considered to be internal factors affecting the business, whereas opportunities and threats are external factors.
IKEAs strengths include leadership position in the global marketplace and strong brand recognition, effective marketing strategy of the company, as well as its financial maturity. Moreover, the company offers its products for highly competitive prices and this strategy provides strong competitive advantage for the company.
The main weaknesses associated with IKEA mostly relate to its global size which makes it difficult to implement its business strategy to vastly differentiated local market conditions. Also, the financial performance of IKEA is greatly vulnerable to the changes of prices of raw materials due to the company strategy of low profit margin for each individual product.
IKEA has opportunities for increasing revenues and achieving long-term growth. Such opportunities include increasing the focus on using recycled materials, engaging in further market expansion and entering Indian, Central Asian and Eastern European markets and increasing the company product ranges to include more variety of technology products.
At the same time, IKEA management have to address a range of threats the business is faced with. For instance, due to the changes in social trends consumers may prefer buying pieces of furniture associated with high class in society. Moreover, the brand image might suffer some damages as a result of poor working conditions in IKEA contractor companies in developing countries revealed by the media. Also, the fears of some economists regarding another economic crisis in US in the near future may prove to be right and this may result in financial losses for IKEA.
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