IKEA – Research Essay
Introduction
The purpose of this research essay is to update IKEA’s company status for the last six years, i.e. 2003 to 2009/2010. The IKEA vision “to create a better everyday life for the many people” is at the heart of its business, in collaboration with the IKEA business Idea “to offer a wide range of well designed, functional products at low prices.” IKEA, a Swedish home furnishings retailer, is known today as the world’s largest designer and retailer of inexpensive, functional furniture. The company’s core competence involves manufacture and distribution wherein they sell their products, through catalogues and websites in addition to in-store retailing. It is important to note that IKEA ensures the development
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(Kotler et al, 2006:52) views a SWOT analysis as the overall evaluation of the company’s Strength, Weaknesses, Opportunity and Threats. Today IKEA’s strength is its vision – “to create a better everyday life for many people,” and being a low cost operator, allows the company to not only beat the competition by producing low cost products, but by also edging ahead with operating costs. These strengths contribute to the company being able to retain its customers. To the contrary, once IKEA identifies its weaknesses it can improve and manage by developing new strategies and setting objectives to help ease the severity of its weaknesses on its image, products and growth. The firm’s main weakness is its high dependence on the European market over the American market. IKEA’s lack of American adaptation has prevented them from being as successful as they are in other countries, which has somewhat hindered its growth. IKEA uses its strength to take advantage of opportunities that arise; moving from international to global status through the development of Asia and Europe. The present growth in the market may result in market saturation, through competition. This competition could emerge from a variety of given sources including: established mass-market companies', development of new lines, and vertical integration, so as to be totally in control of supplies and products being sold on the respective markets.
IKEA‘s marketing mix is its
1. Given the SWOT analysis presented in the case, what are IKEA’s key competitive advantages? What strategic focus should the company take as it looks to further expand into the U.S. market?
The rapidly growth in sales of IKEA in its own country thanks to its innovative new concept in furniture and its reinforcement with polish suppliers, during the 1950s and 1960s, gave to IKEA the option to consider in going further of Swedish borders. Thus, in 1963 was opened the first Store in Oslo capital of Norway. This first step was a guideline to continue the expansion process IKEA has started, and helped to strengthen the internal market in Sweden with the opening of the biggest store in Stockholm in 1965, and the second international store in Denmark in 1969.
This paper aims to demonstrate a detailed description of the elements of ‘IKEA’ company based on its famous name in the furniture industry.
John Lewis is a British department store that operates in the United Kindom and is well known for its ‘Never Knowingly Undersold’ policy that brings quality products to the UK high streets and online shopping. A SWOT analysis is intended to analyse the organisation 's current status and its potential for the future. Morrison (2011, p. 158) states that a “SWOT analysis is a strategic tool used by businesses to assess the organisation 's strengths, weaknesses, opportunities and threats.” Using a SWOT analysis will encompass a detailed evaluation of the organisation for John Lewis, which could be used to benefit the company in the future. As Wetherly & Otter (2008, pp. 24-25) says “The capacity of a business to take advantage of opportunities and resist threats will depend on its internal strengths and weaknesses.” But if John Lewis has the internal strengths to undertake a change a SWOT analysis will help as it was “designed to enable an organisation to take into account internal and external factors that may affect its strategic planning decisions and thus improve its prospects of success” (Harrison, 2014, p. 6).
In 1951, to reduce product returns, he opened a display store in nearby Älmhult village to allow customers to inspect products before buying. It was an immediate success, with customers traveling seven hours from the capital Stockholm by train to visit. Based on the store’s success, IKEA stopped accepting mail orders. Later Kamprad reflected, “The basis of the modern IKEA concept was created [at this time] and in principle it still applies. First and foremost, we use a catalog to tempt people to visit an exhibition, which today is our store. . . . Then, catalog in hand, customers can see simple interiors for themselves, touch the furniture they want to buy and then write out an order.”2 As Kamprad developed and refined his furniture retailing business model he became increasingly frustrated with the way a tightly knit cartel of furniture manufacturers controlled the Swedish industry to keep prices high. He began to view the situation not just as a business opportunity but also as an unacceptable social problem that he wanted to correct. Foreshadowing a vision for IKEA that would later be articulated as “creating a better life for the many people,” he wrote: “A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEA’s aim is to change this situation. We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of
In IKEA’s history two different modes of entry were used. Both were met with big success and allowed IKEA to enter new markets very easily, and in a secure way.
IKEA is rumored to be a very standardized retailer, i.e., a certain set of marketing strategies is used that are the same around the world. This indeed sets IKEA, operating on markets in Europe, US as well as Asia and Australia, apart among international retailers. Often the theoretical conclusions in international
As describe in the current situation IKEA is doing well, and their concept is working worldwide. But as every company, IKEA also has weaknesses and threats also come along IKEA’s path. A good way of making an overview of not only the internal, but also external situation of IKEA, is by a SWOT analysis. In this chapter IKEA’s strengths and weaknesses, as well as the companies opportunities and threats will be shown in a SWOT analysis.
As IKEA stores are located away from the urban areas, many customers may only patronize the stores during weekends. Hence, the store may be relatively quiet during the weekdays and highly packed with shoppers over the weekends. In the case of IKEA, although it adopts the self-service concept in their stores, it actually still maintains a high level of contact with their customers. To ease and facilitate consumer’s shopping, IKEA provides catalogues, measuring tapes, shopping list and pencils. In addition, IKEA stores are designed to have a ‘family shopping experience’ with customer services and facilities such as a restaurant, day care facilities and a Swedish shop. Parents can leave their kids in a supervised play area, or keep their children with them in pushchairs provided (Slack, Chambers and Johnston, 2007). The key point about IKEA is that it is different to the rest of its industry. In typical furniture stores similar products are grouped together and the final delivery of products to customers may take several weeks.
The cost of production of furniture are pretty low at the moment and so, new competitor will surface and it don’t take as much money as it did in the past to set up a furniture company. Economy recession is another factor that will threaten IKEA status as lesser people will be spending their money to replace their existing furniture.
IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)
The stores have restaurant, childcare facilities and plenty of parking. Customers can drop off their kids at the playroom and have delicious meal when they are tired. All of these not only provide customer with a comfortable shopping environment but also let them make an ‘IKEA trip’ and enjoy the fun of buying. Besides, IKEA’s distinctive show rooms help creating differentiation. Products are strategically placed in different small spaces like rooms which allow customers imaging this furniture in their own home. This makes everything looks more attractive.
The IKEA Group, one of the world’s top furniture retailers, has emerged as the fastest-growing furniture retailer in the US. Its unique business strategy has given it its strengths for its success today. However, like all strategies, IKEA’s strategy has its own flaws that can pose as weaknesses. IKEA also has a lot of opportunities in the marketplace such as expansions of their company and threats such as competitors in the same industry.
IKEA is a manufacturer of home and business furnishings who offer interior furnishing products to consumers in several countries across the globe. Before IKEA plans on expanding and entering any new market, they are required to obtain a clear understanding of what consumer behaviour and requirements are in that particular market. There are basically two types of Markets which include Consumer Market and Business Market.
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.