Research IKEA in the UK. Its main market, location of stores, revenue, adaptations of business model to suit UK and types of advertising.
IKEA is an international company that designs home self assemble products such as; desks, beds, chairs, wardrobes, appliances and accessories. The Swedish company was originally founded in 1943 by Ingvar Kamprad who is widely known for his clean-lined image (The Telegraph, 2012, p. 1) and has since become one of the biggest self-assembly furniture organisations in the world with over 300 stores in 28 different countries (Kotler, 1999).
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Whilst Germany remains IKEA’s main market, the UK has had increasing success in recent years: “IKEA sales are booming in the UK as price cuts, cheaper home deliveries and a bigger online product range helped the world’s largest furniture retailer grab a larger market share” (Kollewe, 2012, p. 1). Part of this success has stemmed from the ?30m investment that was provided to the 18 stores within the UK. The location of these stores is also an important factor in IKEA’s success since it is imperative that they are conveniently placed for customers and that they are spread out evenly throughout the UK. This enables a larger customer base to be created and as asserted by Krafft and Mantrala (2010, p. 249); “in order to locate its stores close to consumers, the retailer must have large number of stores.” Since this does appear to be the case it seems as though business structure of IKEA does conform to customer requirements.
IKEA’s corporate structure is divided into two parts which are; franchising and operations, yet because of the complex nature of the IKEA systems it is often very difficult to determine ownership. Nevertheless, franchisees are required to pay a 3% franchise fee to Inter IKEA systems, which is the owner of the IKEA trademark. This does not apply in relation to IKEA operations as these are controlled by INGKA holding. Despite the uncertainty of ownership the entire IKEA group have made significant profits and in the year ending 31st August 2011 IKEA “achieved total sales of ?1.15 billion and further market share growth from 6.1% in 2010 to 6.3% in 2011” (IKEA, 2011, p. 1). In order to ensure that this type of success is maintained, IKEA’s business model is cleverly structured in a way that is suited to the UK. This includes a great deal of emphasis being placed upon social responsibility since the company believes that a “a strong vision and social ambition is a plausible and profitable platform for spectacular growth” (McMullen, 2012, p. 1). IKEA has also created a service culture which enables the common norms and values of society to be conformed to. This is what attracts a lot of IKEA’s customers and helps to maintain sustainability and growth (Edvardsson and Enquist, 2010, p. 182).
IKEA adopts a standardized approach in its marketing strategies, yet the approaches that are undertaken are adapted to the different consumer cultures that exist within the market (Burt et al. 2010, p. 183). A number of different advertising campaigns have thus been launched in the UK, including the ‘Home is the Most Important Place in the World’ campaign that was launched in 2007. In 2008 IKEA also paired up with the ‘Sims 2’ video game makers in order to launch the ‘Sims 2 IKEA Home Stuff’ campaign and had the MV Red Osprey of Red Funnel in Southampton painted entirely yellow to celebrate the opening of the new IKEA store. ‘Happy Inside’ is another advertising campaign that was launched in 2010 which had 100 cats lying on IKEA furniture enabling potential customers to view the products IKEA was selling. Furthermore, a campaign called ‘Love, Peace and Storage’ was also launched in 2011 which features comedians questioning who was the messiest in the home; men or women. The director of the UK’s IKEA made it clear that they are “committed to understanding how their customers live life at home so that they can provide solutions to make them happier” (Kimberley, 2011, p. 1). This appears to be a wise move since customers needs should always be conformed to in order to guarantee sustainability (Bell and McGillivray: 2008; p. 55).
In determining what these needs are, however, it is important to investigate the external environment. This is because, “industrial networks and business relationships play key roles for the strategy of IKEA” (Baraldi, 2008. p. 120). Therefore, in order for IKEA to accomplish their objectives, the external network needs to be considered and used as this would otherwise stifle the growth of the company and sustainability would not be attained. Arguably, it is thereby imperative that the external environment is continuously reviewed within any organization as this promotes healthy changes to be made and ensures the growth of the company. Whilst there are a number of different ways the external environment can be analyzed, IKEA tends to adopt the PEST approach. This analysis which stands for; political, economic, social and technological is suitable when examining external factors. This is because; “such external factors are usually beyond the firms control and sometimes present themselves as threats. For this reasons, some say that PEST is an appropriate term for these factors” (LaPan and Franks, 2005; p. 95). This will certainly ensure that the business strategy of IKEA is in accordance with customer needs and values and will allow sustainability to be maintained which is one of the main factors which contributes to an organisations success.
Overall, IKEA is one of the main home products organisations that exist throughout the world, yet the reasons why IKEA has been so successful is largely due to the ways in which it markets itself as well as the business strategies that have been incorporated. Thus, whilst IKEA adopts a standardized approach in its marketing strategies, they all seek to ensure that the customer’s needs are being conformed. This is attained by evaluating the external environment and considering the common norms and values of society. Once this has been done, a service culture can then be created which helps to promote growth and maintain sustainability.
Baraldi, E. (2008) Strategy in Networks: Experiences from IKEA, University of California Berkeley, vol. 50, no. 4.
Bell, S., & McGillivray, D., (2008). Environmental Law, (7th ed). OUP.
Burt, S. Johansson, U. and Thelander, A. (2010) Standardized Marketing Strategies in RetailingIKEA’s Marketing Strategies in Sweden, the UK and China, Journal of Retailing and Consumer Services, vol. 18.
Edvarsson, B. and Enquist, B. (2010) The IKEA Saga: How Service Culture Drives Service Strategy, The Service Industries Journal, vol. 22, no. 4.
IKEA. (2011) IKEA UK announces Financial Year 2011 Results, News Room, [Online] Available: http://www.ikea.com/gb/en/about_ikea/newsitem/IKEA_FY11_results_02.11.11 [13 January 2013].
The Telegraph. (2012) It looks so easy at first, [Online] Available: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9575911/It-looks-so-easy-at-first….html [12 January 2013].
Kimberley, S. (2011) IKEA rolls out battle of the sexes campaign, Brand Republic, [Online] Available: http://www.brandrepublic.com/bulletin/brandrepublicnewsbulletin/article/1063045/ikea-rolls-battle-sexes-campaign/ [13 January 2013].
Kollewe, J. (2012) IKEA Bucks Retail Trend, The Guardian, [Online] Available: http://www.guardian.co.uk/business/2012/nov/02/ikea-bucks-retail-trend [13 January 2013].
Krafft, M. and Mantrala, M. K. (2010) Retailing in the 21st Century: Current and Future Trends, Springer, 2nd Edition.
LaPan, K. R., and Franks, S., (2005). Creating a Winning Business Plan. Author House.
McMullen, M. (2012) IKEA’s Business Model Includes Social Responsibility, Winnipeg Free Press, [Online] Available: http://www.winnipegfreepress.com/arts-and-life/entertainment/books/ikeas-business-model-includes-social-responsibility-allen-wrench-142175283.html [13 January 2013].