Furnishing the world, assessing the development of Ikea

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Furnishing the world, assessing the development of IKEA’s competitiveness using Porters 5 forces Model,

Since its origins as a small business selling knives, wallets, picture framings and whatever else its customers required, IKEA founded in 1943 by Ingvar Kamprad has always strived to provide the product at 30-50% less than its competitors. In 1947 furniture was added to their line and in the 62 years since then IKEA has become one of, if not the biggest and most successful furniture company in the world. The company aims to provide its customers well designed and functional furniture at the right price irrespective of the customer’s geographic location, in fact IKEA aims to provide quality furniture cheaply as opposed to providing cheap furniture.

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The company’s vision is to create a better everyday life for its target customers, 20-35 year old first homeowners by offering a great selection of well-designed, practical home furnishings. Since IKEA has chosen this sort of affordable and distinctive marketing strategy, the company has been very successful in its expansion throughout the world. Key to this success is the way the company uses Porter’s 5 Forces model covering the following areas, detriment of supplier power, threat of new entrants, rivalry among existing firms, detriments of buyer power, and the threat of substitute products.

IKEA meets these problems head on. By carrying out a SWOT analysis it becomes clear that IKEA’s major strength is in its size and the cost savings it makes through economies of scale, it can offer a massive boost to local economies in employment, it currently outsources 90% of its production to low cost suppliers in low labor cost countries close to the raw materials required for its products,

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