i

UNIVERSITY OF BEDFORDSHIRE FOREIGN TRADE UNIVERSITY

SCHOOL OF BUSINESS HO CHI MINH CITY CAMPUS
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END-MODULE ASSIGNMENT
Module: Strategy and Innovations
Code: BSS029-2

Student: TRẦN THỊ THÙY AN FOR EXAMINERS ONLY

Student ID: 2045519130 Grade (in number):

………………..
Cohort: K58BF-A
Grade (in words):
Semester: I ………………..
Academic year: 2021-2022 Examiner 1
(Signature & Fullname)
Headteacher: Lu Thi Thuy Van
………………..
Submission date: 11 October 2021
Examiner 2
Student’s signature: (Signature & Fullname)
………………..

Ho Chi Minh City, October 2021

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UNIVERSITY OF BEDFORDSHIRE FOREIGN TRADE UNIVERSITY

SCHOOL OF BUSINESS HO CHI MINH CITY CAMPUS
----------***---------- ----------***----------

END-MODULE ASSIGNMENT

Module: Strategy & Innovations

Code: BSS029-2

IKEA BUSINESS ANALYSIS

& STRATEGIC ISSUE

Student’s name: TRẦN THỊ THÙY AN

Student ID: 2045519130
Cohort: K58BF-A
Semester: I
Academic year: 2021-2022
Lecturer: Dr. Tran Quoc Trung

Ho Chi Minh City, October 2021

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STATEMENT OF AUTHORSHIP
Except where reference is made in the text of the end-module
assignment, this assignment contains no material published elsewhere or
extracted in whole or in part from an assignment which I have submitted or
qualified for or been awarded another degree or diploma.
No other person’s work has been used without due acknowledgements
in the end-module assignment.
This end-module assignment has not been submitted for the evaluation
of any other modules or the award of any degree or diploma in other tertiary
institutions.

Ho Chi Minh City, October 2021

Trần Thị Thùy An

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TABLE OF CONTENTS
Page

Statement of Authorship................................................................................ i
Table of Contents .......................................................................................... ii
CHAPTER ONE. INTRODUCTION ...............................................................1
CHAPTER TWO. IKEA BUSINESS ANALYSIS ..........................................2
2.1. IKEA external analysis: PESTEL ..................................................... 2
2.2. Furniture industry analysis: FIVE FORCES’ PORTER ............... 5
2.3. SWOT changes in 2020 ....................................................................... 6
2.4. Analyze resources to provide competitive advantages: VRIO ....... 8
CHAPTER THREE. IKEA FUTURE STRATEGIC ISSUES .........................9
CHAPTER FOUR. LIST OF TABLES AND FIGURES...............................11
CHAPTER FIVE. REFERENCES .................................................................12
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CHAPTER ONE. INTRODUCTION

IKEA was established since 1943 starting in Sweden. There were 345 stores
around the world and increased to 445 by end of August 2020 (Statista, 2021). In
2013, Ikea was already one of the top retailers for furniture, home appliances and
accessories in the world. It provided stylish, functional, and quality readymade
furniture, home applicants and accessories with affordable prices to customers.
Remaining the core business with furniture and houseware, Ikea also involved in
restaurants, food, and housing industries as side business (UKEssays, 2018). It was
proven that Ikea is a reputed global brand with long-term success. The rapid growth
internationally would also credit to the Franchising which Ikea adopted (Alzghool,
2020). Ikea is 40th world top brand in 2019 (Forbes, 2020).
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CHAPTER TWO. BUSINESS ANALYSIS

2.1. IKEA external analysis

PESTEL
Political Analysis
- Global political issues: due to 41 countries with 461 IKEA stores worldwide,
the company must abide by the regulation of each.
- Political about export, import, and other significant laws should be taken
into account. The Brexit referendum in 2016 still impacts on the IKEA import cost in
2020, while it tried to shield consumers, the flatpack furniture firm still boosted price
tags by 3.6% in some areas to counter a 13.7% jump in the cost of imports.

Figure 2.1. IKEA Global Map

Economic Analysis
- Economic Crisis of 2020: throughout the pandemic, IKEA has suffered many
lockdowns, social distancing and closed-store. Ikea announced retail sales of 35.2
billion euros in the financial year to September. That is 1.5 billion less than a year
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earlier, despite online growth of 60%. Nevertheless, this is a strong performance

according to the furniture chain.
+ Sale of goods: dropped significantly for several weeks at the height of the
pandemic, more than 350 IKEA stores were closed. Orders were cancelled, and
production at both Inter IKEA Group and IKEA suppliers’ factories stopped.
+ Cost of goods sold: Total costs this year were less than in FY19, mainly as a
result of lower purchase volumes due to the pandemic and lower prices from IKEA
suppliers. However, e-commerce sales continued to create increased costs for
packaging and logistics in FY20.
+ Operational cost: Staff cost decreased during 2020, due to the strategy to stop
new recruitment by Inter IKEA Group. Expenses to develop new products and
solutions. The costs related to development and innovation portfolios amounted to
EUR 267 million in FY20. Charitable donations are also included in operational costs.

Figure 2.2. The Financial Annual Report of IKEA 2020

- Changes in Currency Exchange Rates: IKEA revenues are directly affected
by exchange rate fluctuations between EUR and USD and other major currencies due
to the global scale of business operations.
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- Fluctuation of Cost of Raw Material: Fluctuations of costs of raw materials

such as wood and metals IKEA uses is a major economic factor that also impacts the
business significantly.

Figure 2.3. The difference in Cost of Raw Material

Socio-cultural analysis
The culture and social factors in a given country can intensely impact
organizational operation, conduct, and profits. The current turning population of
Brazilian is 186 million people. However, the country 86 % literacy degrees, but the
spread of inequality is still a significant issue in this country. The income spreads still
immense between the helpless people and rich people. In this regard, there is a
meaningful societal position, exceptional for the middle-classes. Moreover, many
middle-aged populations in Brazil have a culture of buying fashion and quality
products, creating a positive structure for Ikea products (de Arruda, & Palmeira,
2016). Furthermore, as Brazil's large population is at the baseline of starting and
having stable homes, furniture demand is still high.
Technological analysis.
The pandemic result as lockdown or isolation also influenced customer buying
habits where most people have turned to the eCommerce business and buying models
(Wang et al., 2018). This provides a great opportunity to Ikea Company. It focuses
on providing a great digital experience through its digital channels, which creates a
feeling similar to a real-life shopping experience.
Environmental analysis
In the northern parts of Brazil, it has sheltered dense woods that include Amazon
Basin which can provide wooden furniture materials. Notably, Most area of Brazil
country is covered by wood. However, over the past decades, the government has
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been cautious about deforestation, particularly the issue of MNC's deforestation

planetary heating. In this regard, Ikea Company has to give the Brazilian authority
assurance that its patterns are really sustainable. Primarily, in most business brands,
sustainability has become an important focus area. This is because it helps create a
better brand image as well as helps with reducing costs. In this regard, sustainability
is a major and serious focus for Ikea. Brazilian has implemented policies aiming to
reduce its ecological fingerprint.
Legal analysis.
In any big business, legal threats are always major concerns. This is because a
country's regulations and laws can hinder business operations, and even small trouble
or violation of government laws can prove costly. Brazilian has transparent and open
laws which guarantee a normal inflow of foreign direct investment (FDI). The
country has set favorable tax treatments and incentives and offers convenient and fair
foreign investment policies.
2.2. Furniture industry analysis
FIVE FORCES’ PORTER
The threat of new entrants
Low: as new entrants need serious investments and expertise in the market to
compete with IKEA. The majority of new entrants will be small players that do not have
sufficient power to threaten IKEA’s positioning in the market.
The threat of substitutes
Low: because the company provides a unique range of products and services to
customers that are rarely covered by other players. Brand image, its popularity, and
support gained via efficient marketing also decreases the chance of success among
substitutes. It is unlikely that substitutes’ wares will be more affordable than products sold
by IKEA.
Bargaining power of customers
Moderate: If IKEA’s products become less affordable, customers will switch to
other competitors, thus affecting IKEA’s profit margin and leading to losses in it. The
quality and safety of IKEA’s products are being frowned upon, and the company seems
to be using double standards by recalling dangerous products from first-world markets
(the USA, Canada) while avoiding the same step in other markets (China) (Xiaobo). Such
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an approach to different markets can result in a loss of loyalty and customers’ decision to
switch to other competitors.
Bargaining power of suppliers
Low: as there is a large number of suppliers available to IKEA in case if its current
suppliers want to increase cost inputs. As IKEA is a famous brand present across the
globe, suppliers are interested in establishing good relationships with it. IKEA is also
interested in maintaining long-lasting relationships with suppliers as it places a high value
on them.
Industry rivalry
Huge: The presence of various influential players such as Wal-Mart, Home Depot,
Alibaba, as well as online retailers makes rivalry in the industry intense; if competitors
can provide lower prices or attractive offers, IKEA’s market share can decrease
significantly.
2.3. SWOT changes in 2021

Figure 2.4. SWOT analysis of IKEA 2020

Strengths
- Customer knowledge: It was observed that some customers' buying behavior
has shifted to online and therefore they enhance their e-commerce business Building
up mobile app to pace up the company up to date on this area.
- Pickup service: improve with better locations, Ikea has started with smaller
stores which are closer to center of city which pick-up points to improve pick-up
service and shop experiences.
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- Eco-conscious consumers: Ikea has improved their product with recycled or

renewable materials, minimize the package sizes, or input healthier food choice for
customers.
- Supply chain integration: suppliers are willing to input additional effort to
cooperate with Ikea due to their long-term relationships.
Weaknesses
- Quality control is difficult for Ikea. In order to keep products in low cost,
customers are still looking for goods with value for money. However, this did not
provide the same to the customers. Moreover, standard products might not fit to all
markets.
- Lack of products diversification in U.S and Asian countries like China and
Japan (UKEssays, 2020, p).
- Localized products might need to be considered for some markets while
remain the advantages on big buy from suppliers.
Opportunities
- Online sales increase: With special situation during the pandemic, Ikea found
that there surged 45% of online sales during last 12 months to August 2020 (Ziady,
2020).
- E-commerce: Ikea had launched its new mobile app since 2019 and provided
shopping by rolling experience to customers (Wilson, 2019). This would also
improve the online business.
- Expand into grocery-only outlets: With the growth of the grocery market,
Ikea would target to attract visit of Ikea shops and website and also improve its
furniture and home applicants / accessories business.
Threads
- Fast competitors: if Ikea's concept and business model keeps on success.
There are also localized brands which Ikea might be aware of when operated in
different areas.
- Economic factors due to Covid-19: With the uncertainties around the world
especially after this long period of pandemic, it may decrease the business growth of
IKEA.
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2.4. Analyze resources to provide competitive advantage:

VRIO ANALYSIS
Resources Value Rare Imitation Organization Competitive
Advantage
Successful Yes, without a No, as most Can be One of the It can't
Implementation comprehensive of the firms imitated by leading provide
of Digital digital strategy are investing competitors players in the sustainable
Strategy it is extremely into industry competitive
difficult to digitalizing advantage
compete operations
Customer Yes, 23% of the Yes, firm has Has been tried Company is Provide
Network and customers invested to by competitors leveraging medium term
Loyalty contribute to build a strong but none of the customer competitive
more than 84% customer them are as loyalty to advantage
of the sales loyalty successful good effect
revenue
Intellectual Yes, they are Yes, IPR and Risk of The firm has Providing
Property extremely other rights imitation is not utilized Strong
Rights, valuable are rare and low but given the full extent Competitive
Copyrights, especially to competition the margins in of its IPR & Advantage
and thwart can't copy the industry other
Trademarks competition disruption properties
chances are
high
Position among Yes, firm has Yes, it has Difficult to Yes, over the Sustainable
Retailers and strong dedicated imitate though years Competitive
Wholesalers – relationship channel not impossible company has Advantage
with retailers partners used it
and wholesalers successfully
Track Record Yes Yes Can't be Yes Providing
of Leadership imitated by Strong
Team at competitors Competitive
Advantage
Global and Yes, as it Yes Can be Yes, it is one Providing
Local Presence diversifies the imitated by of the most Strong
revenue streams competitors diversified Competitive
and isolate companies in Advantage
company's its industry
balance sheet
from economic
cycles
Talent to Yes No Can be Yes Not critical
Manage imitated by factor
Regulatory and competitors
Legal
Obligations
Financial Yes No Financial Company has Temporary
Resources instruments sustainable Competitive
and market financial Advantage
liquidity are position
available to all
the nearest
competitors
Opportunities Can be valuable No No All the Has potential
in the Adjacent as they will capabilities of
Industries & create new the
New Resources revenue streams organization
Required to are not fully
Enter utilized yet
Brand Yes Yes, Ikea No Ikea Sustainable
awareness Sustainability Sustainability Competitive
has one of has utilized Advantage
the leading its leading
brand in the brand
industry position in
various
segments

Figure 2.5. VRIO analysis of IKEA 2020

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CHAPTER THREE. IKEA FUTURE STRATEGIC ISSUES

- Current crisis affects price strategy

The current crisis has affected demand for almost all products in all sectors. The
Ikea Company should apply penetration pricing strategies which include setting low
and affordable prices to gain market share quickly. The standardized approach should
follow penetration pricing strategies while promoting the brand in a nutshell.
- How to keep the innovations and creativity to satisfy customers need?
Given that fashion and product quality are highly valued in Brazil, Ikea can use
its basic styles and core innovations to enter the Brazilian market (de Arruda &
Palmeira, 2016). Additionally, the company can combine its standardized image with
an extensive experience domestic partner and form a joint venture, in this regard, a
local well-known furniture brand.
Such a venture will offer more knowledge about domestic culture, which will
help Ikea design new furniture products to attract customers.
- Health and safety of employee after reopening select stores.
- How to rightly develop the e-commerce platform of IKEA?
In the months since Covid-19 hit, closed IKEA stores and social distancing
forced customers to pre-order items online, and then pick them up in person.
However, IKEA has fielded widespread customer complaint with:
+ Capacity: in 2020, due to lots of IKEA retail stores have been closed until
now, part of customers indeed to drive a long journey to pick up the ordered items.
In addition, this issue still not be handled even when IKEA reopened selected
stores.
+ Lack of staff in digital capabilities: the retailers have to deal with the
struggle of numerous orders, meanwhile the number of staff on this fields is shortage,
in turn, most of customer complaints were about the delaying of operations.
- Lack of inventory: because of the suppliers systems shutdown during
Corona Virus, IKEA experience outed of stock in various production lines.
The data show IKEA struggles to sock around 1000 of its popular product
line in the UK market.
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- Unsustainable supply chain after the pandemic and the Brexit: like
many retailers, IKEA are witnessing ongoing challenges with supply chain,
labor shortage with transport, raw materials and sourcing all impacted.
+ Driver shortage: in the Ireland and UK market, this issues still on
managed.
+ Raw material shortage.
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CHAPTER FOUR. TABLES AND FIGURES

No. Name of figure Page

Figure 2.1 IKEA Global Map 02
Figure 2.2 The Financial Annual Report of IKEA 2020 03
Figure 2.3 The difference in Cost of Raw Material 04
Figure 2.4 SWOT analysis of IKEA 2020 06
Figure 2.5 VRIO analysis of IKEA 2020 08
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CHAPTER FIVE. REFERENCES

Home Furniture, Décor & Outdoors - Shop Online (2021). Available at:
https://www.ikea.com/us/en/ (Accessed: 10 October 2021).
Ikea struggling to supply 1,000 product lines to UK due to Brexit and driver
shortage (2021). Available at: https://www.independent.co.uk/news/uk/home-
news/ikea-delivery-issues-shortage-brexit-b1913611.html (Accessed: 10 October
2021).
Ikea loses 1.5 billion euros to corona crisis (2020). Available at:
https://www.retaildetail.eu/en/news/furniture/ikea-loses-15-billion-euros-corona-
crisis (Accessed: 10 October 2021).
IKEA PESTEL Analysis - Research Methodology (2019). Available at:
https://research-methodology.net/ikea-pest-analysis/ (Accessed: 10 October 2021).
Inside IKEA’s Digital Transformation (2021). Available at:
https://hbr.org/2021/06/inside-ikeas-digital-transformation (Accessed: 10 October
2021).
IKEA Furniture Industry Company: Competitive Power | Free Essay
Example (2021). Available at: https://studycorgi.com/ikea-furniture-industry-
company-competitive-power/ (Accessed: 10 October 2021).
Porter’s Five Forces Analysis of IKEA-Porter Analysis (2019). Available at:
https://www.porteranalysis.com/porters-five-forces-analysis-of-ikea/ (Accessed: 10
October 2021).
Pro, E. (2021) Solved VRIO / VRIN : Sustainability at IKEA Group
Analysis , EMBA Pro for Executive MBA Professionals. Available at:
https://embapro.com/frontpage/vrioanalysis/14958-ikea-sustainability (Accessed: 10
October 2021).
Pro, E. (2021) Solved VRIO / VRIN : Sustainability at IKEA Group
Analysis , EMBA Pro for Executive MBA Professionals. Available at:
https://embapro.com/frontpage/vrioanalysis/14958-ikea-sustainability (Accessed: 10
October 2021).
IKEA: PESTLE, SWOT and Porter's Five Analysis (2021). Available at:
https://www.ukessays.com/assignments/ikea-pestle-swot-and-porters-five-analysis-
2021.php (Accessed: 10 October 2021).
Ikea’s e-commerce was already pretty bad. During COVID-19, it absolutely fell
apart (2020). Available at: https://www.fastcompany.com/90547486/ikeas-e-
commerce-was-already-pretty-bad-during-covid-19-it-absolutely-fell-apart
(Accessed: 10 October 2021).
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The crisis that brought out the best in IKEA (2021). Available at:
https://www.politicshome.com/members/article/the-crisis-that-brought-out-the-best-
in-ikea (Accessed: 10 October 2021).
IKEA SWOT & PESTLE Analysis | SWOT & PESTLE (2016). Available at:
https://www.swotandpestle.com/ikea/ (Accessed: 10 October 2021).
Ikea Competitors Analysis [2021]: How Does It Stand Out? - Business
Chronicler (2021). Available at: https://businesschronicler.com/competitors/ikea-
competitors-analysis/ (Accessed: 10 October 2021).
5 Competitive Analysis Frameworks Explained with Visuals - Alexa Blog (2019).
Available at: https://blog.alexa.com/competitive-analysis-frameworks/ (Accessed:
10 October 2021).