Table of Contents

SWOT Evaluation

Marketing Strategy

Marketing in 4Ps

Organization

Suggestions

Ingvar KAMPRAD, at 17 years old, founded IKEA, an acronym that combines his initials with those of his family farm, Elmtaryd. Agunnaryd is the village near the farm. 572). Kamprad predicted that the post-war rebuilding boom would lead to a rise of consumerism. He moved quickly to offer low-cost furniture through catalog sales. 572). IKEA’s first catalog was published in 1947. Kamprad included the newly invented pen to his product line. Kamprad laid the foundations for IKEA’s future by adding home furnishings and furniture to the mail order line in 1950. The IKEA catalogue was expanded a year later. In 1952, Kamprad’s high-quality and low-priced home furnishings helped to strengthen the IKEA line of products. IKEA hosted its first show room in 1953. Kamprad demonstrated his vertical integration by integrating suppliers under IKEA and coordinating their long-term production plans. IKEA discovered its “flat-box” method of selling unassembled furniture in 1955. 572). IKEA’s first warehouse store was opened in 1964. This allowed IKEA customers to collect their own containers at the store. 572). IKEA created a new formula combining practical solutions with a low cost promise. The furniture was “knocked down”, shipped and stored in flat boxes and assembled by consumers using IKEA tools and instructions. The formula was a way for families to both save money and experience a different furniture experience. IKEA revolutionized home furnishings.

IKEA currently operates as a private limited corporation owned by a family controlled organization. It has become a global leader in furniture retailing by working with 1,500 suppliers from around the globe, which is about 50 countries. Through international trade, they now have 341 outlets in 38 different countries, such as: Germany. United States. France. Italy. United Kingdom. Sweden. Spain. Canada. Russia. China. IKEA’s vision is to create a “better everyday life” for everyone. Our business plan supports this vision through a variety of functional, well-designed home furnishings at low prices that everyone can afford. IKEA directs the company’s business in all areas, including design, production, stores, and customers. The team works together to provide quality products for affordable prices. This involves optimizing every aspect of the value chain. It also includes building long-term relations with suppliers and investing in innovative technologies.

Mikael Ohlsson served as the company’s president for 30 years. He was replaced in 2013 by Peter Agnefjall. We are committed to sustainability in all we do. “Sustainability shouldn’t be an expensive luxury. It should instead be accessible to everyone.” (Peter Agnefjall …”,, 2013). IKEA is a global retailer of low-cost furniture, accessories, and bathroom products. IKEA says that it will grow its business by responding quickly to the dreams and needs of our customers for a better home. We have so much more to learn about customers. That’s why we strive to make our products affordable and of high quality. We also invest long-term in our company, people, planet and business. IKEA offers new formats for stores and services that make it easier to get to IKEA, buy products nearby, or even have them delivered. IKEA is committed to making a positive contribution to the environment and has invested in solar panels and wind farms to generate renewable energy. All of their lighting is LED, which is good for both the planet and your wallet, since LED lightbulbs use up 85% less power than traditional bulbs. They also last for 20 years. The products are made from 100% cotton, which is sourced from sustainable resources. This includes soft furnishings such as bedding, rugs and towels. They constantly offer new products and service that help their customers reduce waste, energy and water consumption at home.

IKEA’s goal is to sell a variety of quality home furnishings that are affordable and of excellent design. The idea was to make furniture that could be easily and cheaply assembled, then to have it delivered to the stores in disassembled form. Displaying it with detailed tags and no salesperson, this was an innovative strategy. It is for this reason that customers spend longer in the store compared to a competitor. The organization of the stores was a way for the company to stand out. IKEA stores are designed to be browsed, so shopping there is a unique experience. The stores were set up and displayed the furniture as if it was in your home, with employees always on hand to answer any questions. IKEA’s customer is half producer and half consumer, because the majority of products are self-assembled. Customers can also order, pick up and transport their own items. The operation must be able to handle a high level of volume, as their products are interchangeable. As the customer contact level is low, their focus is on cost-effectiveness, whereas competitors are more concerned with high costs due to lower volume, higher variety, and less customer contact. IKEA’s new iOS shopping app complements their existing catalog. The application’s home screen displays a series of offers designed to attract the consumer. The application is easy to use, users can simply touch an item to see more information and search for other products in a specific area. The app allows users to view the product’s availability in a specific location. It will also tell them where that particular item is located within the store.

IKEA uses three metrics to evaluate its performance: Quality, Speed, Dependability, Flexibility, and Cost. By doing all they can to be the best, IKEA wants to gain a competitive advantage in terms of quality. Their products are designed to meet the needs of their clients. The store layout is clean and unique. It matches the brand’s identity. The products and the services are perceived as being of high quality by customers. The speed they achieve is also a result of their ability to do things quickly. The store’s bright yellow-and-blue identity helps customers find it quickly. The store has a parking lot and a storage area, so customers can park their vehicles without having to spend extra time looking for parking nearby. The store has a variety of facilities to support customers, including childcare and self serve restaurants. This allows them to concentrate on making their purchases while their children are playing. Flat-packs are available with codes to help customers easily find what they need in the warehouse. IKEA has a large conveyor belt to move items quickly through the checkout. It is important to the company that things are done on time. A reordering program that keeps track of goods out-ofstock and minimizes them is an example. IKEA strives to get new stock as quickly as possible if a stockout occurs and also reorders quantities if the sales pattern changes. The company also ensures that the items are always available and maintains a reasonable queueing time. IKEA is able to offer new services and products because of its operation. Global sourcing allows IKEA to respond more quickly to customers’ needs and wants. This strategy allows for faster introduction of new products as the company leaves a lot of design work to its suppliers. IKEA has a flexible approach and offers a range of products. The products range from furniture for the home to office and accessory items, to childcare and self-service restaurants. The mix-and-match concept is a great way to offer flexibility. The company’s output can be changed. It is up to each store’s management team to decide the stock level of every product. They can then react more quickly to any changes in demand. IKEA is also committed to a particular cost objective: doing things as cheaply possible. Quality reduces costs and the time it takes to redo something. Fast operations improve customer flow and reduce inventory, which increases sales. Reliability increases efficiency and predictability. Flexible companies can adapt to changes and adjust their operations to meet customer needs without incurring extra costs.

This industry is very vulnerable to new competitors. The entry barrier is low, but the competition for newcomers is fierce. For competitors to be able to compete, they must invest huge amounts of money, have long-standing client relationships, and choose the right locations for their stores. In order to compete effectively, competitors must invest a lot of money, develop long-term relationships with clients and select suitable locations for outlets. IKEA’s success in maintaining and managing long-standing relationships with existing suppliers is well documented. There are at least 1350 suppliers spread across 54 countries. Twenty percent of those are located within China. IKEA owns their own manufacturing firm, Swedwood Manufacturer. This company is used for developing their own designs. Suppliers are in a weak bargaining position and may be compelled by IKEA to accept the same terms as IKEA. Consumers have many choices because many other direct competitors also import from China. IKEA should keep up-to-date with the latest styles to prevent losing its reputation as a style leader. A simple design and innovative technologies allow them to quickly adapt to new styles. It is difficult for other companies to replace basic furniture because the demand has been relatively constant. IKEA, recognizing the fierce competition in this industry, entered China and Japan’s markets to give them a competitive edge (Perepu 2008).

IKEA has to deal with many political issues, including government attitudes towards the brand as well as political stability. IKEA admitted in 2012 that they used prison labour in East Germany to produce their products during the 1970s & 1980s. Even though they issued a formal apology to the public, this incident sparked a lot of controversy. Ingvar Hamprad’s alleged Nazi membership caused controversy that negatively affected the brand. IKEA’s doll Lufsig was also the subject of negative attention. Lufsig in Swedish means clumsy. When translated into Cantonese, it sounds like an insult. A protester hurled a Lufsig toy towards Hong Kong’s chief executives in 2013. The toy became a symbol for Cantonese dissatisfied by the government.

IKEA’s and any other company’s performance is affected by two major economic factors. These are the macroeconomic condition and consumer purchasing power. The global financial and economic crisis from 2007-2009 was a prime example of external factors that affect business. IKEA cut around 5,000 positions, and its sales volume fell by 1% to the second half of 2009. A large global company, IKEA’s operations are directly affected also by currency fluctuations between Europe and the United States. Interest rates, tax rates and unemployment levels, as well as fluctuations in the cost of raw materials, are also factors.

IKEA faces both direct as well as indirect effects from social factors. IKEA’s future growth is threatened by the growing concern in society about environmental issues. These include water depletion, deforestation and global climate change. This company is one the largest wood consumers in the world, and the social changes associated with environmental issues may harm the brand’s image. The shift from desktop programs to online applications for completing a variety of personal and business tasks is another issue. As a result, the demand for bookcases will decline. IKEA can be affected by a number of social factors including demographic shifts, changing consumer attitudes, the media’s perception of IKEA, and changes in the way people view furniture, home appliances and other products.

IKEA has a lot of competition, mainly from local retailers. These are the ones who copy IKEA products and try to imitate the design. Target, Ashley Furniture Walmart La-Z-Boy JCPenney Ethan Allen, Walmart and La-Z-Boy are all competitors of IKEA. Tesco and Next are the competitors in the United Kingdom. Damro in Sri Lanka is the main competition. Walmart is considered to be the leading competitor worldwide due to its style and functionality, despite IKEA having lower prices. Walmart’s products are deemed less stylish than those sold by IKEA. Ethan Allen’s market is more exclusive than IKEA. IKEA’s ability to deliver high quality for less money than their competitors has been proven (Jain, 2012.

SWOT AnalysisIKEA is the largest furniture retailer on the planet. They have many strengths. IKEA’s global image and strong brand is a strength, as it allows everyone to recognize the company. Their sustainability is a major strength. Their products are unique and make consumers more inclined to buy them. A wide range of products that appeal to different target groups is one of their greatest strengths. They are not limited to one market and can therefore appeal to everyone. Because they can provide a range of products for a diverse group of people, this allows them to create a large number of different products.

The fact that IKEA stores are difficult to reach is a major problem. IKEA has stores in some states, but not all. This means that consumers have to travel to reach the IKEA store. Because of the size of their warehouse, they can’t offer stores everywhere. It is therefore easier to have just one store in each state. Consumer perceptions on quality and cost are also a weakness. Customers may not believe that the quality is worth the cost of a particular product or vice-versa. IKEA is not helped if consumers think in the other direction.

IKEA has a great opportunity in online sales. Since consumers can now purchase products and have them delivered, they are more likely to sell than if they were to rely on the sales of their actual stores. Customers prefer to buy online and have the product delivered because stores are difficult to reach. It is only a problem if the product looks or appears different from what was advertised online. IKEA can increase its sales by offering low-cost products in the current economy and promoting companies’ environmental awareness.

IKEA stores have seen less traffic because of the economic slowdown. Even though IKEA offers low prices, some consumers may find the prices too high. Furniture is not everyone’s top priority, especially if they just bought a place to live. The cost of buying a new home or moving could also have been a factor in the drop in traffic to stores. IKEA is most at risk of losing out on lucrative markets due to their failure to adapt to different cultures, requirements, and wants. IKEA can’t gain global sales if the company doesn’t adjust quickly.

Marketing StrategyIKEA distinguishes itself from its competitors through their leadership in cost and their shopping experience. IKEA does a survey of their competition to establish benchmarks and then sets the price 30-50% lower. It is important to keep costs low, so IKEA first establishes a benchmark price, then chooses the manufacturer, material and design. Saving money is a win-win for both the customer and the retailer.

IKEA offers a unique shopping experience. IKEA displays their products in rooms-like settings to make it easier for customers to imagine how they can be put together. The arrows on the floor would guide customers through a maze-like room. Their Swedish restaurant, which is located in their building, is as popular and well-known as the furniture. Customers can use these products to eat at this restaurant. IKEA’s restaurant uses its own cups, plates, bowls and utensils. They also have a drink made exclusively in their stores that they only offer.

IKEA segments their market based on several factors. Income level, family lifecycle, lifestyles and benefit-seeking are the basic segmentation bases they use. IKEA wants to appeal to all markets because they offer high-quality products at affordable prices. IKEA’s stores are geared towards attracting younger, lower-income individuals. IKEA focuses on college students, young adults and other individuals with lower income levels, because they’re looking to purchase their first furniture. They don’t want to spend a lot of money because it is their first furniture purchase. Young adults and college students are searching for cheap furniture which will last for a while.

IKEA’s other major demographic is the family lifecycle. They need to furnish their homes, but are limited in funds due to the fact that they have already spent a large amount of money on their home. IKEA offers a wide variety of affordable products that are perfect for these families. IKEA is also very kid-friendly. It has clean changing room facilities, as well as supervised areas for children to play while parents shop. There is a children’s menu at the restaurant.

IKEA’s 4Ps are based around a combination of low prices and high quality. IKEA prices themselves at 30-50% below their competitors’ prices (Sonwane). Customers are attracted by the product. Customers want to see high-quality materials. To make sure that the surfaces of furniture are clearly visible, they place them in an area where customers can see them. Customers are shown displays that allow them to sit and touch the furniture. IKEA uses flat packed boxes to help with shopping. The boxes are easily transported into vehicles, which reduces shipping costs.

IKEA advertises its products in every country where they have a presence. The ads are translated into different languages to make them more understandable for the consumer. The IMC (integrated communication marketing) includes public relations and advertising. They also use digital marketing. Press coverage and events like family buffets are part of their public relations. Direct marketing includes catalogs that are published and distributed online each year. Catalogs are available in several editions, languages, and are printed with chlorine-free papers that contain up to 10-15% of post-consumer materials. Print ads are created for both online and offline use. Video advertisements are also produced and used on TV, the Internet, and other media. For sales promotions, they offer discounts online and in store. They use Facebook, Youtube and Twitter for digital advertising.

IKEA is a global retailer that distributes their products via online distribution, in-store and national stores. Mattel operates in North America and South America as well as Europe, Russia, Australia, and Asia. IKEA focuses on distribution to reduce the distance between the manufacturer and the customer. It is cheaper for IKEA and consumers to distribute in large numbers and flat packaging. IKEA’s group of stores is located in 28 different nations, with 978 suppliers.

OrganizationThe flat-box management strategy is a good description of the company. “The organization structure is like the flat-box IKEA, with only 4 layers between the CEO and cashier in the sales floor,” (Griffin, 2016, p. 1). A horizontal organizational structure could also be called a flat box structure. “Flatter structure are more adaptable and flexible” (Griffin). “Flat structure has fewer management layers, and each level controls a broad group or area” (Griffin). IKEA segregates its team by those who have similar expertise and knowledge in a certain skill. IKEA has four different levels. Figure 1 illustrates this. Communication and coordination are two of the advantages to this management style. The higher-ups can make decisions and help. The flat box has a disadvantage in that it increases the manager’s workload. “Faster communication leads to quicker decisions but may result in heaviness of workload for managers” (Griffin 2016).

They build their supply chain with suppliers. IKEA can negotiate better prices with their suppliers than any other company. Because they can reach agreements with suppliers that will have a positive impact on the company, it turns into a long term business relationship. Long-term relationships are accompanied by long-term agreements. “Cost-per touch” is a inventory management strategy that allows customers to select furniture and receive packages.

Transport costs can be reduced by sourcing materials near the supply chain. IKEA can reduce the price of its products by delivering them directly from the supplier. It also reduces their carbon footprint and reduces handling costs. The warehouse is also attached to the retail store, saving them money. By doing this, they reduce a step in the process of supply chain.

IKEA’s hollow furniture is also a way to conserve resources. Their supply-chain strategy benefits sustainability.

IKEA managers are responsible for managing the inventory. The ordering process and the logistics are at the core of this. The logistics framework is a planning tool for the management and flow of information, capital, material, services, and service. (Lu, 2016, p. 1). The delivery notices will be sorted after the inventory has been checked. IKEA supply chain is made up of raw material, manufacturing, distributor, retailer, and the consumer, according Logistics World. Inventory moves from the manufacturer to the distributor, and then the retailer and distribution center.

IKEA struggles to adapt to cultures in other countries. The company tried to use the same model as when it expanded into China and America. The fact that consumers in different countries are so different made them realize they had made a mistake. American customers, for example, demand larger beds and closets. IKEA needed to adapt their business model to each country they expanded into to be able to reach all consumers.

IKEA did not do any research when they expanded to China. It was the price that caused most of the problems, because in Europe and North America they were considered to be low. In China however, they were considered high. In addition, they needed to adjust their marketing strategies because catalogs were a big part of the strategy. IKEA had to adjust its marketing strategy because of how they use catalogs as a major tool.

RecommendationsThere’s not much IKEA should change about how they are as a company because what they’re doing currently makes them very successful. Continue to be different from the competition by providing stylish, affordable products. They should increase the interaction between employees and customers in their stores. When expanding into new areas, they should do more research to make sure they appeal to the most people possible. They could increase sales by changing some of their styles according to the demographics.