Ikea Case Analysis

shell Study Analysis IKEA IKEA possesses numerous strengths that provide help the high society understand high value proposition around the globe in familiar and in the f whole in States in particular. IKEA has been well k straightn for its distinctive self-service chime in, unassembled piece of article of piece of furniture with flat packages, and featured amenities as playrooms for children and Swedish cafes. Its advantage in the united States has visibly shown through the double revenues from 1997 to 2001 ($600 million to $1. 7 zillion) (IKEA Invades America case study). By 2002, the joined States was IKEAs third-largest market, after Germany and United Kingdom, (exhibit 3 IKEA Invades America case study) with 14 instals established, second largest number of barge ins ecumenic (exhibit 4 IKEA Invades America case study). IKEA displays itself as a unique IKEA purification, in which the minute the guests set their feet in the store, they emerge in the total new world of furniture shop with the latest, trendiest interior intents.E trulybody could be a interior designer of their own crime syndicates for the time they are there, being fitted to choose from a wide selection of items available for each ornamental setting, mix & match themes and color, etc. The store layout is designed in a predetermined path that leads shoppers toward antithetical layouts of the model rooms. IKEA uses price tags with detailed education concerning the reaping, how to pick them up later at the storage (aisle , bin ), and color-coordinated card for design tips throughout the store for customers convenience.If customers need to carry on the shopping without their children, they could drop their kids at the childcare facility on the way into the store featuring large climbing structures. If they are hungry, they could stop by the IKEA restaurant with luscious items like smoke salmon or Swedish meatballs. In short, IKEA designs their store to piece every c ustomers personal needs. IKEAs visual modality Statement about building a partnership with its customers reaches many different needs and dreams within satiable budgets.On a two-way partnership, IKEA get togethers its uniqueness by having designers create furniture that satisfies the aesthetic, address, and tonus criteria on one hand, and searching worldwidely for suppliers with the most suitable raw materials to maintain the petty(a)est price viable for their customers on the other hand. IKEAs customers, therefore, are given to a greater extent than choices in their selection of furniture that best suits their interest and vision of how they want to show their homes/offices.The innovative flat packaging is one of the key determinant factors of how IKEA attains their low- cost goals for customers, for storage space and cost of inventory are signifi butt endtly reduced. IKEA in any case creates a unique experience for their customers in such that instead of having a piece of furniture readily available for use, customers can now gain a more(prenominal) personal touch by putting in some labor to build up their piece of furniture into a complete crop.IKEAs slogan Low price with meaning in the Vision Statement emphasizes the companys payload to offer modishly designed mathematical products in low cost and decent quality in order to help people improve their homes and create better terrene lives. Although flat packaging and the experience of self-built furniture are perceived as the distinctive components of IKEA, it will be helpful to aggrandise the services to a wider range of customers who love the products yet refuse to go through the enkindle of setting them up.One suggestion is to have an active delivery and assembling police squad that can deliver the finished product to customers who are willing to conduct the extra costs. At IKEA, a product-strategy council consisted of senior managers go through the bring of establishing priorities e stablish on consumer trends and creating the matrix to set the products objective retail prices. The matrix includes three radical price ranges and four basic styles, according to Figure B in the case study.Although the matrix is very successful at helping the product managers identify market opportunities and gaps in the companys product lineup, the matrix is limited in call of few product styles and price ranges. Hence, the choices in the store would only appeal to a limited group of customers who share the same tastes for interior designs as IKEAs designers. Yet, I do not think the company should depart its product lineup because by doing so, the company would increase its inventory and plan cost tremendously that would consequently lead to higher products prices.The President of the IKEA company recognizes that the Scandinavian design and style is a niche and it is not to everyones taste. Therefore, although the company may seek to appeal to a broader market, it does not wa nt to be just another supplier of traditional furniture. I support this rase of view and do believe that IKEA should continue to find applying its matrix address in its product lineup. One of the other challenges IKEA is approach in the American market is the guarantee of supplying lifetime quality products.The American consumers who specifically emphasize their demand on the longevity of the furniture would lean toward the oddment retailers that guarantee the lifetime of their purchases instead of IKEAs commitment-free approach to furniture. As a result, in order to gain more market share within the American population, the company ought to modify the matrix. IKEA can do so by modifying its pricing bracket to include more high quality products, which allow a specific organiseed group of customers more freedom in the process of choosing the most satisfying piece of furniture that come overs all of their needs.With the high volume of purchasing products from Europe and Asia, s pecifically mainland China and Poland (exhibit 5 and 6 IKEA Invades America case study), the company can for certain increase the quality of their high-end products without much increases in the already low planetary purchasing prices. Giving the high marketability of furniture retailing ($67 billion in gross revenue in 2002 trip study IKEA Invades America) and the wide air in low-end and high-end retailers in the United States, IKEA has very peachy market opportunities in increasing its climb upth rate.IKEA provides customers a one-of-a-kind furniture shopping experience that incomplete the low-end or high-end retailers can provide. Plus, IKEA supplies customers with more attractive products compared to low-end retailers and more options for price-sensitive customers compared to high-end retailers. In addition, with the original economic situation, people will steer away from expensive specialty stores and turn to the economical market.With the companys low cost product s trategy, based largely on the global suppliers and internal competitive plan designs, IKEA could certainly objective lens its marketing toward price-sensitive consumers in the recession to make the company more attractive. One suggestion would be have more IKEA fixture in college town and statistically graded pool cities in the democracy because low-income population would definitely find IKEA products more appealing than other unseductive low-end retailers. swot AnalysisStrengthsOnly organization of their kindScandinavian heritageLow cost with clever designStore layout and compileues Shopping cultureConvenient for transportationClear instruction and easy-to-assemble WeaknessesShort lifespanLimited product stylesLimited location for a no-delivery service OpportunitiesMarketability of furniture retailingPrice-sensitive consumers in recessionWide dichotomy of trustworthy retailers ThreatsDependant on global suppliersEmergence of low end retailersHigh quality specialty retail ersIKEA Case AnalysisIKEA has a distinct market segment in the home furnishing arena. It has created a niche market with innovative designs, quality, and low price structure. IKEA has use the cost leadership and product differentiation strategies through low price structure and innovative designs, respectively. Additionally, the uniqueness of the disposable furniture concept allowed IKEA to take advantage on the first mover advantage (Harrison & Enz, 2005). Behavioral Customer segmentation for IKEA The behavioral consumer segmentation info provided by Bartlett and Nanda (1996) indicates the demographic visibility of IKEA customers and bargainer behavior.IKEAs strategy post World War II, was to target young couples and new families in the low to middle income range by providing inexpensive furniture with durable construction and contemporary lines. The demographic profile presented by Bartlett and Nanda (1996) suggests that the archetypal IKEA buyer is young middle-class get unite either has no children or one child and lives in a rental. This new target markets primary determinants to purchase were based predominantly on price (44%) followed by large assortment (16%) and design (14%). Quality design and price were the three most important criteria for store choice.Similarly, price distance and design were the significant factors leading to consumer attitude toward IKEA. This target market based their decision purchases on entropy gathered from the IKEA catalog visits to other stores and prior visits to IKEA. Contrary to the traditional IKEA consumers determinants to purchase and buyer behavior, sustainability is now playing a larger role in consumer spending habits (Datamonitor, 2010). In a recent Customer Satisfaction Index (CSI) analysis IKEA was ranked ninth overall for customer satisfaction, which is largely due to IKEAs commitment to sustainable initiatives.Of IKEAs products, 71% are recyclable, made from recycled products, or both. IKEA as well recycles 84% of the waste the stores generate (Datamonitor, 2010). Comparison of Traditional and U. S. Customers Before unveiling the U. S. market in 1985, IKEA did not conduct thorough market explore on U. S. consumers or U. S. buyer behavior. IKEA assumed that U. S. customers would embrace its way of doing line of reasoning and the products offered. That was not the case, as IKEAs furniture metric measurements and kitchenwares did not meet U. S. customers expectations.The furniture was uncomfortable, as it was designed for the European mouthful of being wicked and rigid. The unit of measure was in centimeters, whereas the U. S. has never pick out the metric system. The U. S. serving sizes are generally larger than the European portions, make the kitchenwares too small for U. S. servings. Likewise, the cabinetry was too small for U. S. appliances. The traditional IKEA customer subscribed to the value proposition that furniture was a soft good versus a hard good. This value proposition was in contradiction with the expectation of the U. S. onsumer, making it necessary for IKEA to rethink its marketing strategy. IKEA launched an advertising campaign targeting U. S. customers at the same time it entered the U. S. market. Its tagline for U. S. consumers was, to take a more commitment-free approach to furniture (Moon, 1996, p. 8). IKEAs intention was to convey to the U. S. population that it was not necessary to bent grass on to furniture for decades. The simplicity and low price point IKEA offers affords consumers the opportunity to replace furniture and opt for a new look at a significantly lower price point than at stately furniture, appliance, or kitchenware stores.IKEA was essentially making fun of U. S. consumers and the desire to keep furniture for decades. Traditional consumers understood that the value proposition offered by IKEA meant no in-store sales assistance limited variety unassembled furniture and no delivery. This did not meet any of the expectations of the U. S. consumer. Hence, the revenues at IKEA in the U. S. were flat, taking almost ten old age before increasing. IKEA has since focused on organic slow growth and low risk in the U. S. as it was a new market (Module 2, beat 1, n. d. ). This allowed IKEA time to do more market research on U. S. ustomers and expand manufacturing facilities. IKEA has done a great job in leading customers to turn of events its products into U. S. homes (Module 2, Lecture 2, n. d. ). IKEA has learned to meet U. S. customer needs by analyze consumer preferences and behaviors based on interactions (Module 2, Lecture 1, n. d. ). This breeding provided demographic and consumer behavior data by store location and region of the United States, allowing IKEA to meet or exceed the loyal customer expectations. Given that, IKEA has built a U. S. cult following and state of mind that is centered on low prices, lightheaded promotions, and contemporary designs (Capell, 2005).U. S. Strateg ic Growth Opportunities for IKEA IKEA was making a huge tug into four major geographic markets in the late 1980s. They were Eastern Europe, Italy, the United Kingdom, and the United States. Any one of these large geographic locations would need exponential function resources and one would have to wonder if IKEA was opening itself up to incredible risk. This hard line expansion poses a major strategic challenge. The major strategic concern was the changing target market segment. IKEA rode the post war louse up boom wave to become successful.The target market segment of low-income married couples had shrunk and the original IKEA customers, the baby boomers, have become older and more comfortable. IKEA is incessantly striving to differentiate its price, products, and services to keep them in line with a first mover competitive advantage and ahead of the market trends to the point that they may be setting the standards for furniture and related product expectations (Harrison & Enz, 2 005). However, the United States target market segment proved to be more knotty as the U. S. consumers were used to having furniture delivered, and preassembled.Additionally, the U. S. consumers and IKEAs other target markets all preferred traditional rather than modern furniture, with the exception of consumers in Denmark and Holland who buy modern design furniture. At IKEA, the furniture product mix is comprised of 70% modern with the remainder being traditional (Lee, 2005). For IKEA to be successful in the U. S. market it would need to tweak its product lines and strategic plans in an motility to achieve growth. In order for IKEA to achieve strategic growth in the U. S. it will need to get the buy-in of senior management to change its product line-up.The lack of senior management buy-in has been proven in many studies to be a leading factor in not attaining growth (McGrath & MacMillan, 2009). IKEA will need to hire a consultant to perform a SWOT analysis to determine the intern al strengths and weaknesses as well as the impertinent opportunities and threats. In addition, utilizing a TOWS matrix derived from the SWOT analysis would prove unspoiled (David, 2009). The TOWS Matrix is designed to assist managers with matching the attributes of IKEA with the various opportunities and threats that exist in the environment.It also allows for the development of corporate strategies than can be implemented, thus maximizing marketplace positioning. The four types of strategies that can be formed based on the TOWS Matrix are SO, which use the firms internal strengths to maximize opportunities WO, which looks at up(a) weaknesses by taking advantage of external opportunities ST, utilizes the companys strengths to stave off threats and WT, which are strategies designed to assist in the development of defense tactics to help reduce internal weaknesses and avoid external threats (David, 2009).The crucial information obtained from the SWOT and TOWS Matrix will prove to be invaluable to IKEA if it wishes to grow in the United States as well as globally. The snap opalescent of information will help tell IKEA what it must become to U. S. and global consumers in order to grow strategically. Failure to capture and understand this information could keep IKEA from growing in a large geographic market.