Cultural Strengths And Cultural Challenges Of IKEA

The well-known ‘build-it-yourself’ product design makes them progressive and makes them running ahead of the competition. IKEA is the only big brand in a category further not present in global markets, there are no real competitors operating in the same category. In 2013 775 million customers visited IKEA in 2013, and its website hosted 1.2 billion visits (4). Due to the ‘build-it-yourself’ product design IKEA is able to provide their customers with high quality and low cost products, even the customers with limited income and limited living space

Introduction: As this report has comprehensible decision oriented approach. It is divided in 3 parts which describes the various problems identifications and assessments faced by IKEA across its market as the company is moving toward Globalisation.

As explained in the “bargaining power of consumers”, it is hard to substitute the products that are offered by IKEA. This is further intensified by the fact that IKEA has formed a brand perception that makes it stand out amongst its

The services and products offered by IKEA provide value to its customers in various ways. For one, the products and services are very affordable. The products and services are not priced highly and therefore, the average customer can enjoy them. At the same time, the products are of high quality. From IKEA’s slogan “low prices but not at any price”, it is clear that the company prices its products lowly but that does not mean that the quality is compromised. IKEA satisfying its customer’s needs through providing them value for their money as they provide quality products that will last for a long time, and at affordable costs. The fact that the company has set the minimum acceptable standards for its wood, implies that it is also keen on quality and on the environmental impact of its action of making furniture ( Edvardsson, Enquist & Hay, 2006).

Cultural Boundaries. IKEA is a multinational company that is faced with a diverse culture of customers and employees. This diversity can complicate the supply chain, by altering different approach, strategies and perspectives of the business functions. Standardization in operations, processes and regulations has helped the company in resolving differences and gaps in actual production / business settings(PWC, cited in Mukazhanova, 2014, p. 12). For IKEA and most businesses, outsourcing can bring significant value and advantage. However, close relationship and monitoring must be implemented to ensure success and alleviate differences (Christopher, cited in Mukazhanova, 2014, p. 12).

Once IKEA identified and understood the consumers (i.e. abandoning metric measured appliances and beds for American standards of size and comfort), they were able to double revenues, from $600 million in 1997 to $1.27 billion in 2002. From this analysis, it is possible to infer that IKEA combined their already successful cost leadership strategy with the properly identified needs of its target market, the American consumer. With this modification of the value chain, IKEA increased revenues and is pointed in the right direction to achieve their growth goals for 2013. As seen in Appendix 1, their projected growth is well into 8% per year, in relation to total projected growth.

Unfortunately, for IKEA, I am well-aware of its main weaknesses, which are; its limited product designs, and its DIY concept for customers that prefer items assembled. Essentially, this weakness provides Zappos with a unique opportunity to capitalize on the market of unsatisfied IKEA customers. For example, Ferrell & Hartline (2014) explains that, “some customers may not appreciate IKEA’s do-it-yourself approach. Moreover, IKEA targets young, cost-conscious customers who want stylish furniture. However, these same consumers also like convenience and usually have the money to pay for it. Consequently, for them, the time and effort involved in shopping for furniture, bringing it home, and assembling it may not be worth it. Furthermore, some customers enjoy having a conversation with a salesperson and getting individual ideas and advice from employees. Therefore, these customers may continue to buy furniture from traditional retailers” (p.498).

IKEA is the largest furniture retailer around the world. The current leadership position of the company provides considerable advantages in terms of the economies of scale and at the same time creating an entry barrier for new competitors. It is ready to achieve the target of EUR 50 billion annual sales by 2020.

1. Design- IKEA designers work in exactly the opposite way from their competitors. They design their products in such a way so that they can keep the prices low. IKEA designers design every product starting with a functional need and then decide on price. With the help of their vast knowledge in innovation and low-cost manufacturing processes through a large network of suppliers, they design the final product which can fulfill consumer’s functional needs. Large volumes are purchased to push prices down even further by distributing the R&D cost. Most IKEA products are designed in such a way so that they can transport in flat packs and assembled at the customer's

By operating the business in Thailand (foreign market), IKEA adopt the strategy called “Think Global, Act Local” in the sense that IKEA maintains, applies and upholds their core values and cultures in their practices, while learning to adapt and understand the Thai culture and the Thai market in terms of needs, desires and wants of Thai people in general in order to survive and succeed.

In some instances IKEA’s expansion to a new country had lacked sufficient research. This is evident from its expansion to United States and Japan. IKEA entered Japan with a local partner but had failed to win over Japanese consumers as they had underestimated the significance of cultural differences. The rush into Japanese market and Japanese customers’ unacceptance for flat pack and self-assembling their own furniture were some of the reasons for failure. Whereas, in US, IKEA had initially replicates its existing business model and products when in expanded its business operations in that country. However, there arise need to customize its products to cater the local customers’ needs. For instance, American customers demand for bigger beds and closets. Hence, several marketing strategies were also changed for the American

Highly competitive market brings IKEA weaknesses such as magnitude of the global business that is or isn’t capable of managing stakeholders, product differentiation, suppliers’ issues of not abiding by IKEA Group Code (IWAY code) in to limelight. Other weaknesses of IKEA i.e. ineffective communication and information exchange with its consumers and stakeholders due to huge scale of business operations are also identified (Johansson et al., 2008).

The debate about standardization and adaptation for international markets has continuously attracted more attention from multinational companies for several years. The case of IKEA has however tried to help me in understanding the argument involving these two marketing strategies as applied in the international markets.

IKEA's strategy is derived from environmental conditions; the Swedish company's understanding before customers want functional furniture, the attractive and modern design, and affordable, with immediate availability. The furniture has lost its status as a heritage object, to become a universal object of consumption.

IKEA’s strategy before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.