Sustainability at IKEA Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Sustainability at IKEA Case Study Help

Five Forces Model

Bargaining Power of Suppliers

The bargaining power of suppliers are low due to the large number of suppliers, which limits the bargaining power of suppliers. IKEA can easily switch from one to another. But if the suppliers deny to supply raw material then it will be difficult for IKEA to manage the situation. To avoid this, IKEA bounds its suppliers in a contract named IWAY.

Bargaining Power of Buyers

The barraging power of customers is high because of the presence of numerous competitors operating in the similar market and providing a range of similar products, which could attract the customers more easily. Apart of this, an advancement in the technology has been witnessed, due to which the companies are shifting towards an increased technological products offering, causing the customer’s barragingpower to be significantly higher.

Threat of New Substitute

The threat of new substitute for the company is low, behind which, one of the reasons is its brand image as IKEA has successfully establish reputable brand image globally. The strategies of IKEA, such as: lower cost, innovative design, people and positive planning makes it differentiated in the competitive market. (Pratap, 2018)

Threat of New Entrant

The threat of new entrants isfrom moderate to low, as they wouldn’t be able to snatch the market share of IKEA. They can enter the market with small scale but won’t be able to affect the business of IKEA. To develop a brand image in such competitive market consumes time and huge investment, which hinders the new entrants to cause anyeffect on IKEA’s international market image.

Entry of competitive rivalry

Entry of rivalry is moderately high. The competition of market share is not that much hugher in comparison to other industries, but still IKEA has facedtough competition to retain its good market image.

Internal Analysis: Resources

In terms of resources IKEA plans to develop energy and resources independently. IKEA Group has relatively boosted the use and availability of timber from greater sustainable source (e.g. FSC-certified forest). End of 2013, 32.4% of IKEA Group's wood usage has become procured from sustainable source. And the organization has deliberated to reach 50% via 2017 and 100% by using 2000, long time concern is expected within the future. For energy independence, IKEA enterprises has invested 1.5 billion euro for sustainable energy, like wind farm, solar panels and biomass infrastructure. This investment by IKEA would follow the long lasting strategy of power saving and enable the company to manufacture the product at lower cost.

The IKEA’s strategy of low cost may lead the company towards a law suit,because it is is already famous for its cheap quality product, even the social media is full of the bad comments and reviews regarding the IKEA products. Even the customers have gotten injured and some of them had died due to a fault in the furniture ensemble as well as its lower quality, causing accidents.IKEA has great market share and it faces huge market competition, which makes it difficult for IKEA to be sustainable in the market.

IKEA innovates its product in totally different way and differentiates itself with new designs, which attract the customer towards its products. IKEA is famous for its inexpensive products, which makes it affordable for low waged customers. The company finds new ways to design its product with low cost, which is the true strength of the company.

Internal Analysis: Competencies and Capabilities

IKEA’s center competency is its unique design capabilities. This functionality results in imparting the customer’s terrific value for money. It is very tough to compete with incredible layout at a completely lower cost. Even if a competitor could suit IKEA’s design it wouldn’t be ableto have a price strategy as unique as IKEA’s. This is due to the economies of scale of IKEA’s worldwide distribution network. IKEA is expert in design differentiation, which facilitates the customer to use all kinds of products that the company manufactures.

The idea of IKEA became a niche within the marketplace. In phrases of concentrating on consumer pleasure, IKEA has established a real core competency. This simplistic and effective strategy allows IKEA to preserve a low-cost structure at the same time while it focuses on value for consumers around the arena in a manner that has additionally sustained profitability.(Abrhiem, 2016)

IKEA constructs a low-cost commercial enterprise version, which enables the purchasers to buy high-quality and well-designed products at lower prices,building sturdy brand fairness through specific promotions and pioneering advertising campaigns that recognize diversity

Conclusion: Recommendations

IKEA is a worldwide commercial enterprise, for whom it is difficult to be sustainable in the market due to a strong and extremely powerful competition in the industry that IKEA operates.We appreciate howwell the company responds to the threats of its sustainability in the market. The proposed alternatives can help the company to sustain its timber supply chain.

IKEA should enhance its value creation to retain its market share. IKEA needs to have an expansion in its business in the context to achieve its target. E-business will help IKEA to have this expansion, as it would be able to be in contact with those customer who are willing to be a part of IKEA. IKEA’s people and planet positive strategy would help it in achieving its goal of double sales with low cost, because it will attract all the customer who are conscious regarding environment friendly equipment and the betterment of the environment..................................

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