Analysis of Ikea Deal

In: Business and Management

Submitted By alexomenia
Words 2762
Pages 12
Strategic Management (BUS 411)

Case study & analysis

By

Osama Albarrak

osabbr@gmail.com 28/12/2011

Supervised by

Dr. Sundaram Nataraja

© 2011 by Osama Albarrak. All rights reserved

Introduction:

In this case, I've studied the internationally known home furnishing retailer, which is (IKEA) the largest furniture retailer in the world. The purpose of the case study is to analyze the objectives and strategies used by IKEA, analyze the company financially, SWOT analyzing and discuss major issue that the company faced.

About:

IKEA is a privately-­‐held, international home products retailer that sells flat pack furniture, accessories, and bathroom and kitchen items in their retail stores around the world. The company, which pioneered flat-­‐pack design furniture at affordable prices, is now the world's largest furniture retailer. IKEA was founded in 1943 by 17-­‐year-­‐old Ingvar Kamprad in Sweden and it is owned by a Dutchregistered foundation controlled by…...

Similar Documents

Ikea Case Analysis

...1. What factors account for the success of IKEA? There are several factors that can be accounted to IKEA’s success, however there is one factor that can be considered as the key factor: - The low cost approach which is demonstrated by the following: o IKEA corporate culture: even after the extreme success and growth that the company has achieved, its corporate culture of cost cutting sensibility remains the same. Employees and Managers are encouraged and reminded to cut cost by reducing unnecessary expenses. o IKEA designs it own low priced furniture which allow them to cut the middle man by removing the suppliers and in turn allow them to reduce cost which were then passed to their customers. o IKEA stores are strictly self-service which reduces the cost of having to hire additional personnel. o IKEA furniture comes unassembled and in flat packaging. The flat package not only allows customer to transport the products easier to their home, but also allows IKEA to ship more items in bulk and cargo as well as reducing the storage space required for the items. Also, labor costs are reduced as an assembly personnel is not longer necessary and cost related to transportation damages are less frequent due to the flat packaging. o IKEA’s corporate slogan, “Low price with meaning,” shows their commitment to offer attractive and cleverly designed products while maintaining their low cost. 2. What do you think of the company’s product strategy and product range? Do you......

Words: 1821 - Pages: 8

Ikea Case Analysis

...Scandinavian and American customers, and examine the growth strategy. At age 17, Ingvar Kamprad founded IKEA with money (a gift) from his dad for successfully completing his studies. In 1951, he published his first catalog. Two years later, he opened a showroom in Almhuit and soon thereafter began designing his own furniture. In 1956, IKEA started testing flat packages. They designed products that could be packaged flat, which greatly reduced company and customer costs. IKEA opened their first store in Almuit in 1958, followed by another in Stockholm in 1965. Between 1965 and 1973, they opened seven new stores in Scandanavia, capturing 15% of the Swedish market. Business was going great, and it was time to expand. In fact, Kamprad said, "It is our duty to expand," dismissing those who insisted that furniture retailing was a strictly local business (Ingvar Kamprad and IKEA, 1996). Moving full steam ahead, Kamprad purchased a faltering IKEA franchise in Canada in 1979. Within 3 years, the canadian store was a lucrative business, and the management team set their sights on the Unites States. By 2002, the IKEA Group was the world's leading furniture retailer (Ingvar Kamprad and IKEA, 1996). Their 154 stores, across 22 countries, and 286 million customers made up gross sales of $12 billion. IKEA's Culture, Philosophy, and Strategy IKEA's founder once said, "The true IKEA spirit is founded on our enthusiasm, on our constant will to renew, on our cost consciousness, on our......

Words: 1779 - Pages: 8

Case Analysis: Ingvar Kamprad and Ikea

...Case Analysis: Ingvar Kamprad and IKEA Our group will illustrate IKEA’s general development in chronological order. We analyze its’ different strategy in corresponding stage, and look into IKEA’s future development. Part 1:IKEA’s initial development 1. Sources of IKEA’s successful entry in Sweden: Ingvar Kamprad saw a great opportunity when the furniture prices increased 41% faster than household goods between 1935 and 1946, and started selling low price, good quality and simpler design furniture primarily to the younger generation of customers who wanted to buy furniture for their first apartment. The tradition in Sweden was to sell expensive, long lasting (family heirloom) furniture, which after the war was too expensive for people. Instead of locating small stores in the central –more expensive part- of the city, he positioned his warehouses in the suburbs, which was a more cost efficient location which also allowed customers to park their cars. Also, because the furniture cartel banned Kamprad to sell directly to customers at shows and persuaded the manufacturing cartel to stop supplying furniture, IKEA started to sell with the help of catalog and started to supply from a different supplier, which allowed him to reduce his prices even more. He also introduced less expensive raw materials and a less-formal working environment. 2. Management process in the Europe-wide operation: In the Europe-wide operation process, we think the most challenging task for IKEA is......

Words: 1560 - Pages: 7

Ikea Case Analysis

...EXECUTIVE SUMMARY จาก Vision ของ IKEA ที่ต้องการให้ผู้บริโภคสามารถออกแบบเฟอร์นิเจอร์ของตนเองได้อย่างอิสระ และเฟอร์นิเจอร์นั้นยังมีราคาถูกและสวยงามอีกด้วยจาก Vision ดังกล่าวจะสามารถกำหนด Mission ของ IKEA ได้ดังนี้"We not only build you furniture, but we build you home for your better everyday life.” IKEA ใช้กลยุทธ์ Penetration Pricing นั่นคือการตั้งราคาสินค้าต่ำกว่าคู่แข่ง 30% ถึง 50% ซึ่งราคาที่ต่ำกว่าของ IKEA ก็ถือว่าเป็น Competition Advantage ของบริษัท เนื่องจากไม่มีบริษัทไหนที่สามารถเลียนแบบสินค้าของ IKEA และขายราคาต่ำเท่า IKEA ได้ ในระยะเริ่มแรก IKEA ก็ประสบปัญหาเรื่องสินค้าของ IKEA ไม่ดึงดูดลูกค้าชาวอเมริกัน เนื่องจากเฟอร์นิเจอร์ของ IKEA นั้นไม่คงทน อันเนื่องมาจากการที่ IKEA ต้อง Minimize Cost ให้มากที่สุด เพื่อที่จะขายสินค้าในราคาถูกได้ วัตถุดิบที่ใช้ในการผลิตเฟอร์นิเจอร์จึงเป็นวัตถุดิบที่มีราคาถูก และไม่คงทนมากนัก IKEA จึงได้ทำการโฆษณาโดยการจัดแคมเปญ หนังโฆษณา “Unboring” โดยมีจุดมุ่งหมายที่จะสื่อถึงคนอเมริกันว่า “อย่ายึดติดกับเฟอร์นิเจอร์ของตนเองมากเกินไป มันก็เป็นแค่เฟอร์นิเจอร์ชิ้นหนึ่ง เปลี่ยนมันบ้างก็ได้”ในที่สุด IKEA ก็ประสบความสำเร็จในการเปลี่ยนค่านิยมที่สั่งสมมานานของชาวอเมริกันได้ และเริ่มกอบโกยรายได้จากชาวอเมริกัน ต่อมา IKEA มีแผนที่จะขยายตลาดในประเทศสหรัฐอเมริกา เนื่องจากเห็นว่าประเทศสหรัฐอเมริกาเป็น Potential Market โดยต้องการขยายให้ครบ 50 สาขาภายในปี 2013 ด้วยเหตุนี้ IKEA จึงต้องพยายามทำให้เฟอร์นิเจอร์สไตล์ Scandinavian ที่เป็นเอกลักษณ์อยู่แล้วของ IKEA ดึงดูดคนจำนวนมากขึ้น เพื่อรองรับกับสาขาที่จะเปิดเพิ่มมากขึ้น เนื่องจากปัจจุบันเฟอร์นิเจอร์สไตล์......

Words: 1244 - Pages: 5

Ikea Case Study Analysis

...militated against the fast market development IKEA had enjoyed in other market regions. Business globalization should involve flexibility of an organization to adapt to different business culture in diverse geographical market segmentation. IKEA had initially failed the transition test which resulted in slow market growth, the company further failed to anticipate the need of the American consumers. IKEA’s idea of using paperback catalogue and word of mouth advertisement would only be successful in familiar markets. Furthermore, the use of the traditional Moose image as a form of “one size fits all” promotional approach did not sell in the new market. Recommendation Promotion - The 21st century has changed the face of advertisement and relying on paperback catalogue would be grossly inadequate for the wide range of consumers the company targets. Apart from the restricted coverage of paperback brochure, there is a limit to the amount of information the consumer would get about the wide variety of product offered by the company. IKEA should be able to capitalize on various social media marketing medium which facilitate a two way communication between manufacturers and consumer, enabling them to efficiently satisfy the needs of their customers. Product – IKEA should increase their product line for consumers to have more varieties and options. They should ensure product standardization to ensure uniform quality across their stores. IKEA should work more with local suppliers......

Words: 346 - Pages: 2

Ikea Analysis Report

...Running Head: IKEA ANALYSIS REPORT Josephine Apuri Argosy University Atlanta IKEA’S marketing IKEA’s products and services are geared towards the overall satisfaction of the needs and wants of every individual customer that walked through their doors, looks them up on the internet or flips through the pages of their catalog. The founder of Ikea Ingvar Kamprad stated that what is good for their customers is also in the long run good for ikea. Their goal is to create a better everyday life for majority of the people. The starting point for Ikea is always, their customer’s needs and wants. That is why Kamprads idea was to offer a wide range of home furnishings of good design and functionality at a price low enough to be afforded by most people (Edvardsson and Enquist, 2006.) Most customers would want to go shopping and not feel pressured to buy, thus Ikea has very few sales people on the floor, and they are rather more of a help aid in locating the items which are stored at the market hall section, often located at the end of the store. They also have special QR codes in case a customer wants to learn more about a specific product. With Ikea’s concentration on individual marketing rather than mass marketing, also takes into consideration the needs and wants of each country. For instance beds are bigger for the U.S customer (Marketing Week, 1996.) Austria’s taste for seventies corner sofas are satisfied too .A majority of Ikea’s stores are located outside of cities......

Words: 1755 - Pages: 8

Ikea Analysis Report

...IKEA Analysis Report Many companies and corporations struggle daily to sustain a competitive advantage and build a strong values-based service. The core difficulty that these companies face is how to create value for their customers and stakeholders such as suppliers and coworkers. A values-based service company can be built and be effective, however, the framework has to be set to ensure success. IKEA group has implemented a framework for the international company and has succeeded in sustainability as a values-based service company. Values-based service consists of attracting and retaining customers to make profits while creating value for customers (Edvardsson, 2006). Customers in today’s society need value added to the customer shopping experience through brand and service (Edvardsson, 2006). The key factor in brands is to show the consumer or customer how one brand differentiates from another and how it can meet that customer’s needs (Edvardsson, 2006). For example, IKEA offers top quality furniture at affordable prices, which also does not lack style and design. The market that IKEA targets wants style, and quality without having to break the bank in which IKEA unquestionably provides to its consumers and stakeholders. Furthermore, service is rooted in a customer’s experience and can also add or decrease value to a brand. A firm can create a sound brand by implementing an efficient and sound branding image that caters to the needs of its targeted market. So how does...

Words: 1979 - Pages: 8

Ikea Case Analysis

...Sweden early on (50s and 60s)? In 1943, IKEA was founded by Ingvar Kamprad at his home town, selling mainly pencils, postcards and other merchandise. From late 40s to early 50s, manufacturing furniture was introduced as a complement to general merchandise. This enabled Kamprad to step in the furniture business and exploring situation and finding new opportunities. The business had gain massive success in the domestic market for the since opening and the key to its achievements is Kamprad’s leadership. He not only had the vision for the furniture industry, market’s situation, and enthusiasm for business, but Kamprad also played an important role in managing the company’s resources, turned it into capabilities and prove IKEA’s distinctive core competencies. Example for that can be IKEA’s leap on the furniture retail industry: more affordable products to target the large amount of customer, showroom and store’s concept, better customer experience… IKEA’s strategy and business model was also the company’s source of success. IKEA’s prioritize the need of customer, in which price and product range rank the first when it comes to satisfy customer demand, following by IKEA store, catalogue… Marketing strategy was also totally different from other market player at that time, with free and comprehensive catalogues, IKEA was able to introduced customer with a new shopping experience. IKEA’s simple objectives were also needed for its growth. IKEA stated that low costs in all operations......

Words: 998 - Pages: 4

Ikea Analysis

...IKEA ANALYSIS REPORT Dan Pinzon Argosy University Abstract This report explores the notion of values-based service, and how a company like IKEA creates value for customers and other stakeholders. In order to better understand the IKEA environment we will look at IKEA’s marketing strategy, beginning with its products, services, and other attributes that contribute to its value proposition. Following, exploring how IKEA creates a well-defined market position, and how they differentiate their offerings from competitor offerings. Included in this report is an assessment of IKEA’s strategy by analyzing its sources of value in its value chain, an explanation of its intangible products and benefits, and why IKEA considers its customers to be critical stakeholders. This report concludes with an establishment of several key performance measures that enables management to integrate IKEA’s values in its operations. Introduction In 1943 Swedish entrepreneur Ingvar Kamprad founded the now furniture giant IKEA. He began by going door to door selling pens, wallets, and watches. When he began selling his low priced furniture, his competitors immediately tried everything to stop him. The local suppliers were banned from selling him raw materials, and he was not allowed to showcase his furniture in industry expeditions. So Ingvar began to innovate, building his own furniture and buying raw materials from other countries. As the company grew globally, IKEA realized the need to adapt......

Words: 2050 - Pages: 9

Analysis the Ikea Advertisement on the Today Newspaper.

...Analysis the IKEA advertisement on the TODAY newspaper. Introduction IKEA is an internationally known home furnishing retailer. It was founded in 1943, when Ingvar Kamprad is 17 years old, his father gave him a graduation gift, to help him create his own company. In 1978, IKEA to enter the Asia’s market, Singapore is the first station, develop to today it is the world's largest furniture retailer. At IKEA, their vision is to create a better everyday life for the many people. Business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. This advertisement is about the a kitchen activities organized by IKEA Singapore, concept is “Keep the relationship”, IKEA believe relationships are meant to last, that is why IKEA kitchens are guaranteed for 25 years. IKEA hope people can keep the relationship with their family members and friends. At the same time, people get the awards. Target Audience The advertisement targets people of two different class groups, the first group are the urban middle class working adults, their age between 22-45 years old, they have independent economic capacity, who can accept the philosophy of design and way of life in IKEA kitchen products. The second groups are the people who just bought the house, they do not have specific age level, maybe they are old people, and they will update their old kitchen to be new,......

Words: 1005 - Pages: 5

Ikea Analysis

...IKEA Analysis Repot Having a successful company takes a lot of work and researching. You see a lot of big successful firms go out of business after many years of being open due to lack of marketing and not being able to keep up with the rapid growing competition. It takes the integration of sales, marketing, front of the line staff and knowing your customers wants and needs to be successful for decades. Not listening to customer demands could be detrimental to your organization. Even if you are successful now, another competitor can rise and take away your market share. An organization should not only care about sales and revenue growth, they need to also be conscience about the environment and care about the working environment of their employees. IKEA is a Swedish company that dominates in the furniture industry and is very successful with their sales and marketing strategies. They are also very conscience about the external environment. They have been in the foreign market since 1973, they currently have stores in over 37 countries and are continuing to grow (most recently Asia). By following the traditional pattern of globalization, first operating in countries with similar cultures and then expanding to the foreign market, they were able to have great international success (Burt, Johansson & Thelander, 2011). We will discuss in detail why IKEA strategies are so effective and why other organization should learn from their current success. IKEA’s......

Words: 2344 - Pages: 10

Ikea Analysis

...furnishing company, IKEA. Also, a discussion on the current operations of the company was carried out using different tools like porter’s value chain analysis and SWOT analysis. Additionally, in this paper it is analysed how e-business is introduced in the IKEA enterprise system to sustain its competitive advantage. At the end Porter’s five forces analysis was important to show the background of competition against the company but also its power in leading the home furnishing industry. IKEA characteristics and Porter’s value chain analysis: IKEA was founded in Sweden in 1943. Over the years the company earned a reputation in all over the world, as being the best in home furnishing and accessories of good design. Besides, IKEA offers low prices foe good quality products. Allowing the majority of people to afford them. The company customers are all those looking for the good opportunities with low prices in home furnishing. Moreover the customers differ from one geographical region to another one. Of course this follows IKEA vision which is creating a better everyday life for many people. In addition to this, amongst the other IKEA’s characteristics there is simplicity [IKEA.com.2014]. In fact, shopping in an IKEA store is like going to food retailer to buy something. The company is operating through a huge number of stores in UK and worldwide. Indeed, the company owns 165 stores in 22 countries with 76 000 workers [UKessays.com. 2014. Management ikea......

Words: 4804 - Pages: 20

Ikea Analysis

...2004 YOUNGME MOON IKEA Invades America In 2002, the IKEA Group was the world’s top furniture retailer. With sales approaching $12 billion, IKEA operated 154 stores in 22 countries and serviced 286 million customers a year. (See Exhibits 1 through 4.) In the United States, IKEA had 14 stores, with plans to open as many as nine more in 2003. There were a number of factors that distinguished IKEA from other furniture retailers—its stores were strictly self-service and featured such amenities as playrooms for children and Swedish cafés, and all of its furniture came unassembled (customers were expected to put together the furniture on their own)—yet there was no question about the company’s success; when a new store opened, it was not unusual for thousands of shoppers to line up on the first day. Company Background IKEA was founded in 1943 when 17-year-old Ingvar Kamprad decided to start a local catalog company using some money his father had given him.1 Initially, the company sold basic household goods at discount prices; in 1947, however, Kamprad began selling home furnishings. Six years later, Kamprad opened his first furniture showroom, and two years after that, IKEA began designing its own low-priced furniture. In 1958, IKEA opened its inaugural store, in Almhult, Sweden; at 6,700 square meters, it was the largest furniture display in Scandinavia at the time. By the time IKEA opened its flagship store in Stockholm in 1965, IKEA had become the favored ...

Words: 5457 - Pages: 22

Ikea Invades America Case Analysis

...segments: IKEA positions itself as a leading international furniture retailer that provides economical, well-designed and functional furniture. As IKEA’s biggest competitive advantage is the low price, IKEA tries all its best to lower the fixed cost and the variable cost, like building supplier relationships in developing countries to reduce labor and production cost; flat-packaging to reduce the freight fee; use materials in a cost-efficient way and in-house design also reduce the resign cost for IKEA. IKEA also differentiate itself with appealing shopping experience, self-service, as well as developing facilities like childcare, restaurants, and lounge rooms. The Scandinavian design and style is also a niche for IKEA. The target segments of IKEA is price-conscious people, who have tight budgets, like college students, younger adults and new families, who want to make the first furniture purchase, then the IKEA may be a very good choice for them due to its price advantage. Another target segment for IKEA is early adopters. For the modern design and unique shopping environment, people who like innovative things will likely to give it a try to IKEA’s furniture. Benefits & drawbacks to IKEA: The benefit that IKEA gains from its strategy: 1. Its price advantage is very obvious compared with other furniture retailers, which can attract large amount of price-conscious customers. 2. The hip Swedish design and appealing shopping experience is a niche for IKEA. 3. All the......

Words: 629 - Pages: 3

Ikea Swot Analysis

...SWOT analysis Strengths * Strong global brand name * Offers a wide range of products which are cheap and affordable * Low cost * Fast delivery * Large network of suppliers – 2,300 suppliers in 67 countries * Good bargaining power with suppliers: the suppliers had long term contracts, received technical advice and leased equipment, and in return, IKEA gained exclusive contracts and low prices. This helped IKEA maintain its cost leadership position. * Synergy with suppliers: IKEA’s designers worked closely with the suppliers to build savings into products from the outset. * Large warehouses for storage * Furniture sold in parts for the customers to choose and assemble * Offers a strong in-store experience. The IKEA store had value-adding offers like free/large parking, free crèche and a café. It offered a complete shopping destination for the customers. * Financially viable: huge and vast warehouses; purchase of Stor, an imitator * IKEA has a flat management structure – 4 layers from the Chief Executive to the warehouse worker. This made decision making and product innovation process fast, contrary to a tall management structure. This is important, especially as the industry is a very competitive one. * The management minimized costs. Flamboyancy and waste were not encouraged - senior managers shared secretaries and travelled economy class. * The IKEA staff is involved in decision making. This is good corporate culture,...

Words: 548 - Pages: 3

Fiat 500L 1.3Mjt 85CV Panorimic Edition Lounge | Komedija | Gefräste Ansaugbrücke mit integriertem Ladeluftkühler! LP-X Projekt Folge 12 | Philipp Kaess |