Professional Documents
Culture Documents
E Business
E Business
Paired Assignment
1. Introduction
3.1 Strengths
3.2 Weaknesses
3.3 Opportunities
3.4 Threats
5. References
Introduction
In recent years, in the development of this digital commerce world, the e-commence of
many companies expand rapidly. Gradually, digital commerce has become an integral
part of people's lives. In fact, such as Amazon and Samsung, it has changed the world's
market landscape and people's consumption habits. Ikea is one of the well-known
furnished retailers with continuous annual growth in more than 250 countries
(Staista,2021). At the same time, transaction costs have been reduced and its
performance has been improved in the development of Ikea’s digital activities. In
addition to that, the
trend of online
shopping helps to
enhance the net sales
of Ikea in its E-
commerce (Ikea,
2022). Kylliainen
(2019) stated that
furniture manufacturing
is an essential industry
for the human beings, notably, Ikea, a global furniture enterprise. However, with the
improvement of people's living standards and the various choice of manufacturers, the
competitive threats of E-commerce in Ikea are increased.
Over the years, IKEA has focused on the offline store experience for its customers. In
fact, Ikea implemented exploring digitalisation (Patton,1980), which stated a
“Multichannel Transformation Programme” to transact its physical store to the internet
platform (Silverman, 2006). Under the reasonable price strategy and digital platform for
purchase, IKEA can keep its loyal customers and increase its revenue on its digital
platform. In fact, a new IKEA app is produced by the company (Ikea, 2022), it lets the
customers shop directly from the app which can also use the virtual system to see if the
product fits their desires or not. Therefore, Ikea is liable for digitalisation and e-
commerce to engage the profits and satisfied the customers (Hagberg and
Jonson,2022). To launch its E-commerce, a compelling diversification strategy should be
stated to IKEA to adapt its performance of physical stores to digital.
Drivers of digital activities
The concept of internal and external drivers is clear, that controllable by organisation is
the internal driver and uncontrollable factors related to the external drivers (Times,
2010).
Ikea catalogues
Invention of App
Cost structure Revenue streams
Profits from furniture and food
Raw material cost
market
Manufacture cost
Service fees (Delivery fees)
Advertising cost
Accessories sales
Labour cost
Transportation cost
Obviously, we can see that Ikea’s internal drivers can be divided into many different parts, but
for digital business, the most representative is the reduction of cost, strengthening of value
preposition, and diversification of channels.
In order to save the shipping and storage costs, IKEA has abandoned the traditional way of
assembling furniture for the customer (Ikea, 2022). IKEA has also created the concept of "flat
packaging" for delivery benefits. The furniture products of it are designed to be disassembled,
which reduces the warehouse space, transport, and storage costs. Therefore, it helps to drive
the E-commerce of Ikea, as the reduction of production costs may bring more revenue to the
company.
Apart from that, customers enjoyed the Ikea experience, it helps to transfer the value
preposition if the E-platform of Ikea included this characteristic. This phenomenon not only
allows companies to save costs but also gives customers a sense of self-satisfaction
(Mintzberd,1994).
Lee, H.S (2021) explained that the largest operation of the service is online tracking, this is the
reason that many companies have an online customer support service system to improve
productivity and to standardise the delivery process.
E-commerce can eliminate the large costs of renting a shop, it can save various money on
advertising and expenses. Advertisement on the Internet can increase the number of sales by
10 times, while it costs one-tenth of the cost of traditional advertising (Wang, 2016).
2.2 External drivers
2.2.1 Developed by PESTLE analysis
Apart from the internal drivers of Ikea, the external channels also affect the development of its
E-commerce. In fact, PESTLE analysis will be implemented to analyse the results.
During the pandemic period, several countries lock down such as China, the UK, US and
Australia, etc. (Sumption, 2020). More than $130 trillion of investment will decline under the
restriction of the government worldwide (McKinsey & Company, 2022). The sales volume of the
retail industry fell negatively by 21.5 % in 2020 compared to 2019 (Gov.uk, 2021) under the
pandemic. The following table is the SWOT analysis of the online presence of IKEA.
Strengths Weaknesses
● Big bricks and Clicks strategy for E- ● Hard to ensure the furniture will not be
commerce platform bring more profit damaged during the delivery.
to IKEA
● Poor sales from e-commerce,
● The Blockchain network of IKEA is because of the reliability in physical
strong, which includes more than stores.
1,800 suppliers in 50 countries
(TradeGeko, 2018). ● Price strategy of the delivery fee.
Opportunity Threat
Strengths
The meaning of Big bricks and clicks means the enterprise owned various physical stores and
launched its e-commerce website for operation (Daniel, 2011). In fact, according to the data in
Ingka Group, the sales in the E-business of IKEA had increased from 18% to 30% and the retail
sales increased by 6.3% (Jansen, 2021).
Figure 1
Statista (2022)
Statista (2020) shows that the E-commerce net sales of Ikea increased rapidly. The structure of
Big bricks and clicks helps to boost the profit of Ikea online and offline. Certainly, thoughtful
digital management of IKEA through analytics-driven digital marketing is likely to enhance sales
and revenue of IKEA (McKinsey, 2021).
Blockchain is a concept of the technology underpinning Bitcoin (Kiviat, 2015), it adapted smart
contracts, protecting data security and reduces human error (Rogerson and Parry, 2020). Ikea
participated in a strong mapping activity system to implement a low-cost strategy to virtually the
target customers. Four elements can be defined in its Mapping Activity system, (Harvard
Business Review, 1996), Trade shift is one of the leading platforms in supply chain payments
and the only authorised e-money for blockchains used by IKEA Iceland (Daily, 2019). According
to TradeGeko(2018), there are more than 1800 suppliers in 50 different countries of IKEA.
Therefore, IKEA owned its strong network in the e-platform and the physical supply chain.
7P’s digital marketing strategy was introduced by Booms and Bitner (1981), the elements of it
included Product, Price, Place, Promotion, People, Processes, and Physical Evidence.
Certainly, IKEA launched its promotion on Instagram (IKEA, 2022) and its websites, to advertise
for target customers and to boost the attention of the potential customer segment. IKEA applied
the 7P strategy in different regions to fulfil the demand of the people. IKEA owned different
Instagram accounts in different regions, for example, the account in Hong Kong posted the
product promotion which is related to entertainment and public issues, and one of its Instagram
posts had more than 20,000 likes (Joyner, 2020).
The website of IKEA included a tracking page for the customers who ordered the furniture (Ikea,
2022). The homepage is easy to participate in, as the customers only need to enter the tracking
number and their contact method, then they can track their parcels. Garn.W. et al. (2020)
indicated that a smooth process of the tracking system can enhance the e-commerce
development continuously and provide an effective service.
Weaknesses
Ø Hard to manage the safety of products during the delivery
After the covid-19, Ikea launched its e-commerce forces, and the delivery and shipping started
to increase. However, it is difficult to ensure the safety of the products during delivery.
According to Mailme (2020), Ikea has a myriad of complaints which were about the long waiting
time for delivery and the missing pieces of the furniture. Ikea may not respond to the complaint
immediately under the long process, and various requests. Certainly, the customer service
system cannot burden the complaints worldwide (Ikea, 2022).
Online and offline are two different channels for the customers, having a good performance
offline does not mean having a similar performance online (Jansen, 2021). One of the selling
points of Ikea is the demo of the home category in physical stores (Ikea, 2022), it enhances the
demand of customers. However, websites and online shopping are hard to fulfil the desire of
customers, previous customers in Ikea are concerned with the Ikea experience such as the
display rooms, flat-packed boxes, and the snacks from the cafe (Ikea, 2022). It is a challenge
as Ikea cannot shift this kind of experience to E-commerce. Barnes (2003) indicated that
customer satisfaction can create value for the company, as it leads to the loyalty and retention
of the customer segment.
The minimum price of shipping one piece of furniture is £ 47 to 53, as the shipment rates raised
during the pandemic, the shipping prices haven’t gone (Consumeradvisory, 2021). In fact, the
delivery service is implemented by standard ground services (Jacobs, 2021), the original cost is
not expensive, but it charges a lot to the consumers. In addition, many customers reported that
the customer service tracking system does not deserve to cost that much in the delivery price.
There were no responses for many customers due to the delivery problems, and the parcels
were always delayed from the time.
Ø Less popularity of the IKEA app
Milne (2019) stated that IKEA develops its application, online functions, and digital offer on the
internet. The effort of the online platform made the sales online increase by 50%, which is more
than the sales from the physical stores (Butler, 2019). Although Ikea has launched a mobile app
for consumers, some of the functions in the app are only available in a few countries (Stackpole,
2021).
Opportunity
From the website of IKEA, it has its own tracking system for the customers who purchased the
products (Ikea, 2022). Reichheld and Schefter (2000) determined that the causal factors of
loyalty, which included the support of customers, time management of delivery, price strategy
for shipment, product presentation, and developed of privacy policies and data transfer of the
company. Analysis of customer satisfaction data was made by Coldwell (2001), the tracking
system on the Ikea website can give some opportunities to Ikea for attracting more customers.
Ø Corporate with other online platforms, such as Alibaba and Amazon to enhance the
profits.
In recent years, Ikea started to sell its product on third-party websites, such as Alibaba and
Amazon (Milne, 2020). In fact, according to Financial Times (2020), Ikea started to sell more
than 3,800 products on Tmall and Alibaba. By selling its product in the third-party website, it is
likely to help Ikea increase its sales globally, Oncu (2019) suggested that Ikea can expand its
business in China by the joint venture with Alibaba. Statista (2022) shows the E-commerce net
sales from 2015 to 2022, the data shows that after the corporate with third-party platform, the
net sales of E-commerce rose from 6,187 million USD in 2020 to 10, 432 million USD in 2022.
Ø Improvement of the digital innovation, such as Introduce DIY line and premium
product line on the E-commerce
The improvement of digital innovation is the concept of value-driven approach (Ng, Ding and
Yip, 2013). Creating a special service such as a premium line or DIY furniture can help to
replace the store experience, it can generate revenue for IKEA (Chesbrough, 2007). In fact, the
competitors, such as Walmart, do not have this kind of service. The unique digital innovation of
Ikea may help to enhance the competition. Linked with the above part of the drivers of Ikea,
improvement of digital innovation is one of the value drivers of IKEA (Ehret, 2010).
Threat
Ø High competition of the E-commerce
During the pandemic, many retail stores started to strengthen their online performance.
According to the data in Statista (2022), there is US $ 7.32bn revenue in the online segment of
plastic and furniture, the revenue growth of it in 2025 will be predicted as 11.36%. The data
shows that the competitiveness of E-commerce will increase in the following years. Dekimpe
(2008) stated that the target customer segment of Ikea overlaps with Walmart, purchase cycle
online, distribution and online marketing of Walmart increase its revenue (Hicks, 2012). In fact, it
leads to a highly competitive market in the online platform.
In fact, Ikea faced some challenges when they decided to expand its E-business model in Asia.
In the beginning period, Ikea implemented a joint-venture strategy in China (Barus, 2014), it
corporate with Alibaba, one of the well-known e-commerce in China, to sell products in it.
However, Joint-venture approach can boost the sales in Ikea, but it will have a negative impact
in the long-term. Cohen and Levinthal (1990) mentioned that there will be uncontrollable risks in
the collaboration, such as the sensitive information of each company.
Different countries may have their regulations for E-commerce, which will threaten the
expansion of Ikea. OECD (2022) explained that the government may apply their own regulations
based on the network environment challenges. Hence, international meetings have been placed
to deal with the economic scale and policy issues among the members states, such as the G7
Ministerial Conference on the Information Society, and the Ministerial Conference on Global
Information Networks. However, difference from the Europe, China adopted FTAs to reform and
manage its e-commerce started from 2006, which would like to reduce technical barriers
(Huang, 2017). Therefore, different restrictions of the countries may affect the decision-making
of Ikea in E-commerce.
Recommendations and Conclusion
Under the analysis of external and internal drivers, also the evaluation in SWOT, there are some
challenges for Ikea in exploring its E-commerce. The following part will provide the
recommendations and conclusion.
In conclusion, the internal and external drivers may affect the development of E-commerce in
IKEA, and the SWOT analysis stated the relevant strategies that can participate to the e-
commerce of IKEA. In response to the previous issues and to improve the performance of
Ikea’s e-commerce, recommendations related to the analyse are given.
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