Ikea Selling Strategy
1. Executive Summary: 2. 1.
IKEA Objectives: * IKEA produces cheap and affordable products for the customers. * The company wants better life for those who cannot afford expensive products. * IKEA always helps to produce right product for the right consumer. * IKEA always tries to sell their products at low prices. * The company’s global developments and its continual commitment is to have a positive impact on people and the environment. 2. 2. IKEA Vision: The Vision is to create a better everyday life for the many people.
They make this possible by offering a wide range of well-designed home furnishing products at prices so low that as many people as possible will be able to afford them. 2. 3. IKEA Mission: The mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them (IKEA 1994). The company targets the customer who is looking for value and is willing to do a little bit of work serving them-selves, transporting the items home and assembling the furniture for a better price.
The typical Ikea customer is young low to middle income family. 2. Company Summary: 3. 4. Company Background: 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 Dutch registered foundation controlled by the Kamprad family.
The company which was originated in Smaland, Sweden, distributes its products through its retail outlets. As of August 2009, the chain has 301 stores in 37 countries, most of them in Europe, North America, Asia and Australia. IKEA founder Ingvar Kamprad was born and grew up on the farm Elmtaryd, parish of Agunnaryd in Smaland, in the south of Sweden. As a young boy Ingvar Kamprad knew that he wanted to develop a business. Various events during his upbringing gave him a strong drive to create his own resources and to be independent. In 1943 The Ikea was born, initially a mail-order business selling pencils, postcards, and other merchandise.
The name derives from the initial letters of Ingvar Kamprad and of Elmtaryd and Agunnaryd. More over in 1948 Furniture manufacturing was an additional business for many farmers in Smaland. So Ingvar Kamprad also introduced Furniture in the IKEA business as a complement to the general merchandise. This was a success and Ingvar Kamprad starts exploring innovative solutions such as furniture design, self-assembly and advertising and by 1951 The first annual IKEA furniture catalogue was published in Sweden. Ikea grew and two years later by 1953 they opened a showroom in Almhult.
Here the customers could see and experience the quality of the products before ordering them and Ingvar could meet customers in person and learn from them. 3. 5. Company Location and Facilities: The company IKEA has a several store over many places in the world as the following a. Europe: Belgium, Bulgaria, Czech Republic, Denmark, Germany, Spain, Greece, France. Iceland, Ireland, Italy, Cyprus, Hungary Netherlands, Norway, Austria, Russia, Poland, Portugal, Romania, Switzerland, Slovakia, Finland, Sweden, Turkey, and United Kingdom b. North America: Canada and United States. c.
Middle East: Kuwait, Saudi Arabia, and United Arab Emirates. d. Asia Pacific: Australia, China, Hong Kong, Japan, Malaysia, Taiwan, Singapore, and Thailand. The facilities that could be found in most of IKEA stores is the same, however they are mentioned in the IKEA Ireland as the following: a. Showroom: IKEA stores are huge home exhibitions. Stretch out on a bed, see how many people you can fit on a sofa, or let your children choose furniture for their rooms. Our room settings are built entirely from IKEA products, and will give you inspirational ideas for furnishing, lighting and decorating your home. . Market hall: The market hall is just what it sounds like: many different specialist shops gathered together. You’ll find everything from rugs to pots to picture frames and clocks. You’ll also see all kinds of home lighting, everything you need for your kitchen, and countless unique gifts you can give to others – or spoil yourself with. c. IKEA Restaurant: At the IKEA restaurant you can take a break from the hard work of shopping. You can even start your day at the IKEA restaurant with breakfast before the store opens. Or why not have coffee and cake in the afternoon!
In the restaurant you’ll find healthy Swedish and local dishes daily made using high quality fresh produce. You can use our highchairs and baby changing facilities for the little ones. And while the grownups rest a few minutes after lunch, the kids can have fun in the children’s play area. d. IKEA for kids: IKEA supervised play area and ballroom, and shop in peace. This way, everyone’s happy. Or if you want them to help make furnishing decisions, strollers are available at the entrance. e. Care and feeding of kids: IKEA provides clean feeding and changing facilities for small children.
And our restaurant has a special menu just for the kids. f. Trolleys for everyone: There are plenty of carts available to help you take your purchases to your car. Or you can bring your car to your purchases by pulling up to our customer loading bay. g. The barter system: Almost any way you want to pay is fine with us. You can always pay with cash or a major of credit card, but other payment methods are usually also available. They vary from store to store, so please check with your local IKEA store to find out more. 3. Product and Services of IKEA: 4. 6. Products Description: IKEA products are identified by single word names.
Most of the names are Scandinavian in origin. Although there are some notable exceptions, most product names are based on a special naming system developed by * Upholstered furniture, coffee tables, rattan furniture, bookshelves, media storage, doorknobs: Swedish place names (for example: Klippan) * Beds, wardrobes, hall furniture: Norwegian place names * Dining tables and chairs: Finnish place names * Bookcase ranges: Occupations * Bathroom articles: Scandinavian lakes, rivers and bays * Kitchens: grammatical terms, sometimes also other names * Chairs, desks: men’s names Fabrics, curtains: women’s names * Garden furniture: Swedish islands * Carpets: Danish place names * Lighting: terms from music, chemistry, meteorology, measures, weights, seasons, months, days, boats, nautical terms * Bed linen, bed covers, pillows/cushions: flowers, plants, precious stones * Children’s items: mammals, birds, adjectives * Curtain accessories: mathematical and geometrical terms * Kitchen utensils: foreign words, spices, herbs, fish, mushrooms, fruits or berries, functional descriptions * Boxes, wall decoration, pictures and frames, clocks: colloquial expressions, 4. . Competitive Comparison: Retailers have generally been slow to develop multilingual Web sites simply because they’ve been slow to expand outside of their domestic markets. According to a Deloitte study of the world’s top 250 retailers, 104 retailers have no international operations at all, but IKEA had a leg-up on its competitors because it built its business not only through store expansion but through a hugely popular mail-order catalog. 4. 8. Supply and Demand Details: We will talk about the market forces for the global market instead of talking about Malaysian market only.
Supply planner – demand ; need Global supply chain management of Children’s lighting products from IKEA suppliers to IKEA stores world-wide, managing sales forecast, capacity planning, replenishment and information flow. Responsible for the global supply to 350 IKEA stores worldwide within a business area of Children’s IKEA. The Increased availability at the store from 85% to 99% within a year. Reduced the stock weeks from 7 weeks to 3 weeks within a half year. Shared knowledge of supply chain management with co-workers in China and Lithuania. 2005 Logistics ; Operations, IKEA Trading Southeast Asia Thailand Managed a variety of competence development programs in areas of logistics and operations for purchaser, technician, supply planner, material manager and business development managers. In addition to be responsible for the company’s Centre of Competence in supply chain management, executed a research program about competence management in a cross-cultural organization that covers Thailand, Vietnam, Malaysia and Indonesia. 150 IKEA Trading Southeast Asia co-workers have attended supply chain management program.
Licentiate thesis has been written and it raised the attention to the importance of total optimization within IKEA pipelines both in goods and information flows. 4. 9. Technology Needs: After surfing the market for information we figured-out that the tools in the industry are similar for all the brands. Tools are the heart of the carpentry profession. The best place to start is with basic hand tools. A measuring tape, combination ruler and level, pencils, hammer; saws, a carpentry square and hand drill are all inexpensive parts of a carpentry set.
Chisels, planes and sanding blocks are also important because furniture needs a fine, smooth finish, free of splinters and sharp corners. A kit of brushes, cloths and sponges are required for the stain and lacquering steps. In order to add padding or upholstery to the furniture, the carpenter will need a set of clamps in varied sizes and a staple gun. Time the first few projects completed in the shop step by step to determine which steps will benefit most from investing a time-saving power tool.
Power saws are the most universal time-saver, and drill presses and power sanders also offer time savings. But Ikea does not have its own manufacturing facilities. Instead, it is using subcontracted manufacturers all over the world for supplies. All research and development activities are however, centralized in Sweden. In order to maintain low cost, 4. Market Analysis 5. 10. Target Market in this study I will not separate each market but instead of that I will focus on the global integrated market. 4. 1. 1 Target Market Segment Strategy: IKEA is large enough to enjoy economies of scale.
This lowers average costs in the long run through, for example, better use of technology or employing specialized managers. Economies of scale also give a business a competitive edge if cost savings are then passed on to customers in the form of lower prices. This puts up high barriers to entry for smaller companies entering the market. The target customer of IKEA is everybody. So the market segment is a very important part of IKEA strategy. After visited the IKEA store, I think the market segment of IKEA is the different part of house, like the kitchen, the bedroom, the bathroom.
Actually, the market segment is according to the “life situation”. The life situation creates the need of the home furniture. IKEA do not select the customer, IKEA just select the offer from the life situation. For example, I am a student. I need the bookshelf, desk and I do not need the kitchen because I do not live in my own place now. But after 10 years, the need of life situation will change. I will need other things. The most important point is that I am always the target customer even in different ages. And IKEA always provide customers the things they need.
I think that is a good method that IKEA used to service the customers and win the hearts of the customers. 4. 1. 2 Market Needs: 4. 1. 3 Market Trends 4. 1. 4 Market Growth: 5. 11. Industry Analysis 4. 2. 1 Industry Participants/Key Players To analyze the Industry I will use Porter five forces analysis: According to Pearce, J. A. and Robinson R. B. (2011) Strategic Management . 12th Edition. New York: McGraw-Hill “Harvard professor Michael E. Porter propelled the concept of industry environment into the foreground of strategic thought and business planning”.
The five forces were as following: 1- Competitive rivalry. 2- Threat of substitute products. 3- Threat of new entrants. 4- Bargaining Power of suppliers. 5- Bargaining Power of customers. * INTERNAL RIVALRY/COMPETITORS: the industry is highly competitive and characterized by other low priced furniture producers such as Galiform of England and retailers such as Wal-Mart of the United States. Internally, the organization saw differences of opinion regarding product offerings and positioning.
Due to the intense competition worldwide, IKEA has wisely attempted to compete by entering the markets which typically pose the largest competition, such as China and Japan. * SUPPLIER POWER: because Ikea had heard from its customers that many of its furniture offerings were too complicated to be assembled by the customer; showing the power of the supplier to make a difference, IKEA has gotten cooperation from some suppliers to provide materials that are easier for the customer to assemble, thereby (using its’ value chain system) by adding value to the supplier relationship. BUYER POWER: everyone can recognize that Buyers have a great deal of influence over IKEA’s product line and direction; for example, in the 1960s, IKEA developed the ability to package its unassembled furniture in flat cartons, making it easier for the buyer to handle the cartons. This considered as a response to direct feedback from the buyer. Additionally, due to buyer demand, IKEA will continue on its current growth strategy. * POTENTIAL ENTRANTS: Domestically, IKEA faces the threat of potential entrants; as the dominant firm, because the nature of the business allows new ventures to enter the market, IKEA worst scenario is the copy-cats.
The organization always feel threaten by any potential new entrant to use do it yourself approach which gives IKEA many of its’ competitive advantages. * THREAT OF SUBSTITUTED PRODUCT AND SERVICE: is low as there are no too many products and services available that can substitute the demand for furniture, home appliances and a range of other products offered by IKEA. So Substitution is not a reason to make them worry, because they have their own market -segments. 4. 2. 2 Main Competitors/Competitive Analysis: If the 5. 0 Strategy and Implementation Summary 5. Marketing Strategy: People like to buy IKEA’s products because of their low prices and medium-quality. People have great awareness of the brand. Moreover, we can see people like to go IKEA store because of good facilities. The products that will be in direct competition with IKEA’S sales are split into distinct different groups by home depot they are: Bedroom, dining room, furniture parts, home office, kid’s room, and living room and kitchen supplies. The different products that are supplied are provided to Home Depot by a variety of different brand names. . 2 Pricing Strategy: IKEA positions itself with low prices. They are extremely price/cost conscious. 5. 3 Promotion Strategy: Promotion: IKEA has its own website where they now have their catalogues virtually. In the last year 198 million copies of the catalogue were printed in 56 editions and 27 languages. Moreover, IKEA uses newspaper ads and television commercials. The company uses billboards ads and bus stop ads. IKEA also faced controversy in their “Tidy up” advertisement campaign. IKEA does not spend largely on promotions.
IKEA believes on their online catalogues and print publications of the catalogs. The catalogue is the main tool for selling. IKEA try to cut the cost with lease advertisement. But it is very important part. 5. 4 Distribution Patterns: IKEA has 28 large distribution centers and 11 customer distribution centers in 16 countries. IKEA has 1400 suppliers for distribution. 5. 5 Marketing Programs People like to buy IKEA’s products because of their low prices and medium-quality. People have great awareness of the brand.
Moreover, we can see people like to go IKEA store because of good facilities. The products that will be in direct competition with IKEA’S sales are split into distinct different groups by home depot they are: Bedroom, dining room, furniture parts, home office, kid’s room, and living room and kitchen supplies. The different products that are supplied are provided to Home Depot by a variety of different brand names. 5. 6 Sales Strategy: 5. 7 Sales Forecast: 5. 8 Sales Programs: 6. 0 Web Plan Summary 6. 1 Website Marketing Strategy 6. 2 Development Requirements