PESTLE Analysis of IKEA

IKEA, a Swedish-based brand, offers lavish home decor and furniture at low prices. Stores are open worldwide, offering a range of products. Some you can find in every location; others are culturally specific.

As a brand, IKEA is complicated. It’s a one-stop-shop for all your household needs. It’s also routinely in the news. Sometimes, it’s for cultural insensitivity. Other times, it’s because a faulty product resulted in customer injury or even death.

For a company as old as IKEA is — serving customers since 1943 — it’s bound to have problems. Just how many? This PESTLE analysis of IKEA uncovers recent controversies, growth, and challenges.

Political factors: Branching into Asian markets

Since IKEA stores are open in more than 41 countries, the company must abide by the regulations of each. Some countries may share similar bills or political influences. But that’s not always the case. One thing is for sure: all countries benefit from political stability. Without it, economic stability is impossible. Meaning, IKEA may lose profits in one location over another, depending on who is in charge and what they stand for (if anything).

For instance, an unfriendly government can make importing and exporting foreign goods a hassle. IKEA depends on these relationships to remain stable, otherwise, their revenue is at stake. On the flip side, a good relationship is a blessing for IKEA. India and China have become more open to international brands. IKEA, seeing this positive shift, is considering moving into Asian markets. Now that a bridge of good faith is opening, IKEA is jumping at the chance.

Economic influences: A smart response to the recession

Just like IKEA is affected by international laws, they’re susceptible to the worldwide economy. Even now, some big name brands are still suffering from the 2007 recession. Thousands of people lost their job at the time. In response, we witnessed consumers make conscious buying decisions. Purchases were based on need rather than luxury. Although people may need furniture, upgrading a mattress, dresser, or couch was far from mind.

Knowing money was tight, IKEA priced their wares conservatively. Now, when you need stylish but inexpensive furnishings, IKEA comes to mind. You can find everything for your home while saving a buck or two. This imagery has continued for decades.

On the business side, IKEA is influenced by a strong and weak dollar. The stronger the dollar, the more US brands can lose money. Luckily, the economy has strengthened (while still recovering). More jobs are opening up and sales are rising again.

Social: International controversies and complaints

Know the local culture before opening your doors.

That’s a rule every business should follow. Not only to tailor the product to the consumers, but to also avoid offending social values. IKEA keeps this rule close for every marketing material they put out. Unfortunately, their efforts aren’t always well-received.

In a Russian catalogue, IKEA removed a same-sex couple from their magazine. Homosexuality is still considered shameful in Russia. Knowing this, IKEA shifted the appearance of their catalogue to suit the general thinking of Russians. Overseas, homosexuality is more widely accepted. That’s why IKEA was put in the hot seat for removing the couple. In another incident, IKEA removed women from a Saudi Arabian catalogue. Once again, the company came under fire in the west.

Still, you can’t say IKEA doesn’t know their customers. They deliver what is “appropriate” per location and scrub out anything that isn’t. If they printed the same catalogue worldwide, they’d likely face a worse backlash in each country. Profits could suffer. At the end of the day, IKEA is a business with only profits on their mind.

Funnily enough, IKEA suffers from a surprising amount of one-star reviews. Searching their name and “reviews” brings up many disgruntled complaints. Most are about never receiving their products after ordering online. Or when the product does arrive, it’s only after weeks of waiting.

Most report an “awful experience” and “horrible delivery” as their main gripes. This may be a fault of the delivery driver and company they use. But since IKEA’s name is on the package, they’ll always be the one receiving the bad press.

Technological: Achieving more with digital catalogues

Paper catalogues are still offered by IKEA. They’re not the only way to showcase products anymore. With the internet literally at our fingers (thanks to our smartphones), people are likely to check out offerings online. Nowadays, every business should have a functioning website. IKEA isn’t an exception.

You can find current offerings, sales, and home decor inspiration on IKEA’s website. Not sure where the closest store is? IKEA’s website lets you know. They also allow for placing orders online. You can’t do that with a paper catalogue.

Online, IKEA aims to provide a realistic experience for their customers. If you can’t make it to their store, you can still maintain a similar experience online. You can search by product or by room (bathroom, living room, etc). If you’re searching for products under $10, they have a category for that.

All businesses benefit from increasing customer satisfaction. It leads to new reviews, word-of-mouth referrals, and brand loyalty. Considering the amount of effort IKEA goes into knowing their consumer base, it’s not surprising their digital channels reflect similar effort.

Legal: Accused of death and harm

All big businesses are susceptible to legal threats. IKEA must follow an abundance of laws and regulations in every country they operate in. Since they’re physical stores, staying up-to-date with labor laws is essential.

That’s not all. IKEA has landed in the news because of poor product quality. Items have fallen and tipped over, resulting in injuries and death. Such devastation has affected families and communities. When problems like this occur, IKEA needs to ensure their products are safe. Otherwise, lawsuits happen. Although they may recover monetarily, their reputation might not.

Environmental: Store-wide renewable resources

IKEA is invested in eco-friendliness. Literally.

They’ve put in more than $1 billion towards renewable energy in poorer nations. They’re aiming for their in-store energy to be fully renewable. One way they’re achieving this is by investing in solar and wind panels. They’re aiming to shift their materials too, like wood and cotton, to be taken from sustainable sources.

Image “ikea” by Steven Coutts is licensed under CC BY 2.0