IKEA CASE STUDY

Introduction: IKEA is one of the world’s most successful global retailers. In 2007,

IKEA had 300 home furnishing superstores in 35 countries and was visited by some 583

million shoppers. IKEA’s low-priced, elegantly designed merchandise, displayed in large

warehouse stores, generated sales of €21.2 billion in 2008, up from € 4.4 billion in 1994.

Although the privately held company refuses to publish figures on profitability, its net

profit margins were rumoured to be approximately 10%, high for a retailer.

Point of View

Understanding the scope and the structure of the entire market is necessary to develop

strategy and anticipate market changes and competitive threats.

Statement of the Problem

How could IKEA sustain and build competitive advantage to improve is profit margin

and to expand its marketing coverage.

Objectives of IKEA:

 Identify the proactive market-driven strategy of IKEA to deliver the superior value

to existing and new customer.

 Analyse the trend of the market to solicit facts and vital information that could be

used in designing and developing marketing strategies.

Point of Consideration:
SWOT ANALYSIS

STRENGTHS:

 IKEA’s cost leadership concept keeps it ahead of its competitors.

 IKEA has successfully combined low cost with good quality

 IKEA’s research and development team finds ways to alter designs to save on

manufacturing costs.

 A key feature of IKEA furniture is self-assembly.

 IKEA uses cheap labor which keeps its cost down and gives them a competitive

advantage.

 Its strong long-term relationship with its suppliers gives it a competitive edge.

 IKEA has the ability to adapt its tactics according to the market.

Weknesess

 Its organizational culture can become a demotivating factor for many of its

employees.

 IKEA is not at all customer focused.

 It lacks through market research on customer’s preference before entering into a

new market.

 IKEA never took economic issues into consideration before being faced with the

problem.

 IKEA has a tendency of making mistake first and then realizing that it should

have taken matters into consideration beforehand.

 IKEA’s strategy is not exactly aligned with its vision.

Opportunities

 IKEA can expand its product line by producing high end products.

 IKEA can expand its business into interior designing and cookeries products.

 IKEA should listen to the customer demand to make more sustainable solution,

 Product customization can boost up IKEA’s sales

Threats

 Changing social trend can hinder the growth of sales of IKEA

 Accelerated market competition in USA

 The risk of global financial crisis

WEAKNESS:

 Stuck in the middle

 Detracting to attain organization plans.

 T No enough distribution channels

 The problem of product recalls

 Difficulties to understand different countries attitudes and tastes

 Opportunity to enter in broad market such as Asian market

 To sustain in long run

 Online orders or E-marketing

 Increasing average growth up to 11%

 Opportunity to create economic designs with existing workforce and designers

 To involve every contributor in value chain in optimal manner

 Focus on differentiated products for the Asian market

 Continuing demand for low prices

 Growing demand for products which do not harm the environment for companies

to use less water when making products and reduce their carbon footprint

THREATS:

 To sustain in long run

 To follow the strategies more than one for long run

 Changing social trends

 Market Forces

 Market forces as more competitors offer similar products

 Environmental issues across the global

Point of Consideration

Marketing Mix
Product – Living Room - Dining Room

Price – the retailer aims to lower prices across its entire offering by an average of 2%

and 3% each year, McCarlin a manager from N.Y. said “we look for competitions take th

Place – a wide structural form of store which size a 5 football field. With attractive

colors. It is designed also in circle thus; customer can see everything while walking in

one direction. Restaurant is available inside the store.

Promotion- Gift certificates to the first in line during opening of the store.

Research and Development

 No-design-no matter how inspired-finds its way into the showroom if it cannot be

made affordable.

 A trial-and-error process that can take as long as three years.

 It challenged 28 designers to find innovative uses for discarded and unusual

materials.

Outsourcing

With network of 1,300 suppliers in 53 countries. IKEA works overtime to find the right

manufacturer for the right product.

Market Segmentation

Customization of their products from different countries to sell better in local markets.

Like in U.S. they preferred to fold their clothes than to hang thus, IKEA made deeper

drawers. Hispanics needs sofas that could fit two or more persons.

ALTERNATIVE COURSE OF ACTION

Pros-Investment in research will give IKEA better ideas and guidelines for the current

trends, behavior and needs of the entire market thus, it will provide superior customer

value.

Cons - R & D programs are too expensive that could affect the price rate of its products.

2. Promotion activities must consistently implemented and regulated

Pros – Promotion of IKEA are attention grabber creating store traffic, more sales and

customer loyalty

Cons – deregulated promotion activities is dangerous for IKEA since expectations of

their loyal customers might end up for customer disloyalty.

3. Merging with other respectable local companies to strengthen its financial

capacity and can easily penetrate the market.

Pros – experience and knowledge of respectable local companies will back-up the

marketing operation of IKEA and will likely to have a slice of the market.

Cons – collision of different company’s cultures and principles.

Recommendation among three options

1. Evaluation of market-driven strategies in different countries and form a committee

that will monitor the status each region. A monthly report of its sales movement must

submitted to committee for proper studying and may be used for future strategies.
2. As part of the CSR, may they continually promote awareness in the conservation of

the environment. They may have a formal memorandum in R & D that only materials

that are not toxic or contribute to the degradation of natural should be used in the

production of their products.

3. Made initiatives in creation of cooperatives to help other poor nations in small

communities to earn a living.