anjalicutek
Anjali Khurana
IKEA (Ingvar Kamprad Elmtaryd Agunnaryd) is a privately held, international home products company that designs and sells ready-to-assemble furniture, appliances and home accessories. The company is now the world's largest furniture retailer.[2]
IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden, named as an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home parish (Agunnaryd, in Småland, South Sweden).[3]
The groups of companies that form IKEA are all controlled by INGKA Holding B.V., a Dutch corporation, which in turn is controlled by a tax-exempt, not-for-profit Dutch foundation.[4] The intellectual property of IKEA is controlled by a series of obscure corporations that can be traced to the Netherlands Antilles.[5]
INGKA Holding B.V. owns the industrial group Swedwood, which sources the manufacturing of IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding B.V. is wholly owned by Stichting INGKA Foundation, which is a non-profit foundation registered in Leiden, Netherlands. The logistics center Europe is located in Dortmund, Germany and Asian Logistic center is located in Singapore along with its IT base.
Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and trademark, and there is a franchising agreement with every IKEA store in the world. The IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered in Luxembourg, which in turn is part of Inter IKEA Holding registered in the Netherlands Antilles. The ownership of the holding companies has not been disclosed.[5]
The company which was originated in Småland, Sweden, distributes its products through its retail outlets. As of October 2010, the chain has 313 stores in 38 countries, most of them in Europe, North America, Asia and Australia. The IKEA Group itself owns 276 stores in 25 countries and the other 37 stores are owned and run by franchisees outside the IKEA Group in 16 countries/territories.[6] 2006 saw the opening of 16 new stores. A total of at least 15 openings or relocations are planned for 2010.[7]
♦ Anders Dahlvig, IKEA group president, needs a strategy to keep IKEA’s growth in the United
States on track.
♦ This recommendation will be written for Mr. Dahlvig from a consultant’s point of view.
SWOT Analysis
♦ Strengths
o IKEA’s flat packaging reduces costs and makes it easier for customers to transport
o The company culture matches its external image – pragmatic, cost-saving sensibilities
o Product design – sleek, minimalist design is popular in Europe; gained popularity in the
U.S.
o Strong in-store experience – unique, experiential, “modern theme parks”
o Brand reputation – in America, people lined to get into newly opened stores
♦ Weaknesses
o Foreign company trying to sell to an American audience – it’s difficult to understand
American attitudes and tastes if you’re not from the country
o Niche market – the minimalist design doesn’t appeal to everyone
o Too strong of an emphasis on cost-saving could lead to cutting corners and negatively
affecting safety
o Product and style selection is limited.
♦ Opportunities
o The budget shopper market is growing, especially among college students and in
metropolitan areas
o In-store restaurants are popular, having grown to be the nation’s 15th largest food chain in
America
o Now that product design has been tailored to American preferences, there is an
opportunity to add “bonus” services to increase customer service and satisfaction
♦ Threats
o Plenty of competition. The furniture retail segment is highly fragmented and IKEA is
flanked by competitors in high-end specialty retailers and low-end discount retailers.
o Discount retailers sell on the basis of price, bringing down margins and making it
difficult to stay profitable.
Issue Identification
IKEA wants to have 50 stores in operation in the United States by 2013 and needs a strategy to sustain its
growth.
Alternatives
♦ Focus on customer service
o Add more services to enhance customers’ experience (e.g. home delivery, interior design
consultants)
o Implement a customer relationship management (CRM) system to track current
customers and communicate with them. Build up customers over a lifetime.
♦ Keep Scandinavian brand and focus on correct placement of stores
o Concentrate stores in metropolitan areas, where apartments are smaller and the
population more transient
o Concentrate stores in college areas with the budget-focused students
o Continue clever advertising to create demand
♦ Expand product lines to flank the budget line with a higher-priced line
o Open up a chain of smaller stores with a more specialty retailer feel
o Create a higher-end product line to appeal to the more suburban market, which is less
likely to change furniture frequently
♦ Emphasize a “pull” marketing strategy by launching a campaign that promotes furniture as a
fashion statement
o Clever advertising and promotion
o Your furniture says something about you. And like fashion, your style changes – so can
your furniture.
Pro/Con Analysis
♦ Focus on customer service
o PRO: Creates a stronger bond with the customer and helps IKEA identify trends in
customer tastes and preferences. Additional services like home delivery or interior design
consultants make the large stores less intimidating for consumers, broadening its
consumer base and appeal.
- IKEA has a profile on its typical shoppers but could benefit from more in-depth
knowledge about them
- Americans did not like IKEA designs at first. Staying in better touch with
customers will help the company avoid this problem in the future.
o CON: Implementing a CRM system is costly. These customer service ideas might also
dilute IKEA’s brand as a minimalist company and moves the company towards the
specialty retailer segment.
- The current model seems to be working and even without these services,
Americans are flocking to the stores. Are these really needed?
♦ Keep Scandinavian brand and focus on correct placement of stores
o PRO: The IKEA brand is already strong and has contributed greatly to its success so far.
This option plays to the company’s strengths. This is familiar territory, as IKEA already
knows its clever marketing and advertisements work. The typical IKEA customer is
concentrated in certain regions of the country, specifically in urban and university areas.
- Tweaking the brand will only weaken it.
- The price, product and promotion mix already works. Correct placement is key to
IKEA’s future growth.
o CON: This option might be too narrow to help the company widen its market appeal and
scope. The opportunity costs could be significant, since the majority of Americans do not
live in cities.
- Not everybody wants to assemble their own furniture or transport big packages
(even if they’re flat) in their cars.
♦ Expand product lines to flank the budget line with a higher-priced line
o PRO: Helps IKEA penetrate a new market. In the specialty retailer market, the profit
margins are greater. IKEA will have to improve its customer service in these stores.
- Lessons learned in customer service here might be leveraged in its current stores.
o CON: IKEA has never operated a high-end retail store. To avoid diluting the IKEA
brand, this new line might need its own name and promotion campaign, which is cost
prohibitive.
- This strategy run counter to IKEA’s promotion to encourage Americans to
change their furniture.
♦ Emphasize a “pull” marketing strategy by launching a campaign that promotes furniture as a
fashion statement
o PRO: Leverages IKEA’s ability to create clever marketing and advertising campaigns.
Creates a “pull” for its products and style. An integrated marketing plan will emphasize
category need, raise brand awareness, craft the right brand attitude, and encourage
consumers to make the purchase.
- Other non-clothing items have managed to craft an “image” of fashion, like
iPods, cell phones, even some automobiles.
- A strong plan will ensure consistent messaging, which is very important in a
company’s hyper-growth phase.
o CON: Expensive! This kind of marketing is also difficult to implement, especially for a
non-American company.
- Americans might still be too attached to their furniture for this option to be
successful.
- Furniture isn’t as easy to change as clothing, which can be easily discarded.
Recommendation
♦ Given the four alternatives above, IKEA should implement the second option – focusing on store
placement. However, the company will also benefit from a strong integrated marketing
communications plan, as outlined in the fourth option. The American market is fickle and hard to
please; without an IMC plan, the company runs the risk of losing mindshare or sending mixed
messages.
♦ With respect to revenue streams, this option will place IKEA stores in areas that are convenient
for its target markets, who live in metropolitan areas and colleges, by making it easy for them to
come to the store and make purchase. IKEA ought to focus on those areas where the populations
are transient and move houses frequently. It will also capitalize on IKEA’s high-value consumers,
by staying in touch with them and encouraging them to return.
Implementation
♦ IKEA must carefully identify cities in which to build its new stores. Current stores seem to be
concentrated in California but there is huge opportunity in select cities in middle America and the
East Coast. I would recommend exploring options like Denver, Colo., Austin, Texas, and Atlanta,
Georgia. It is critical that IKEA does not lose sight of its target market – consumers who
“traveled abroad, liked taking risks … was an early adopter of consumer technologies.”
♦ The company should also concentrate its stores in college areas, especially metropolitan colleges
and universities. Size and space constraints in these areas might preclude IKEA from opening a
store in the downtown area, but consumers seem willing to travel a little bit out of the way for the
products. Instead of a store in Washington D.C., for example, one could be built in Virginia.
♦ The integrated marketing plan needs to be bold, clever and innovative. The idea is to encourage
consumers to use their furniture as a fashion or style statement – this mindset will bring
consumers into IKEA who want both function and form, which are two of IKEA’s strengths. This
will also encourage consumers to change their furniture or home accessories, as the styles and
fashions change. These consumers consistently upgrade their laptop computers, buy the latest cell
phone, etc. IKEA products are less expensive than those other items.
♦ The IMC should include non-traditional media channels, as well. I would recommend focusing on
clever Internet ads, since that is likely the main communication vehicle for the target
demographic.
♦ In Expert Choice, these recommendations do the most to grow the urban and budget-focused
demographics. It does not reach the high-end consumers, but I would not recommend that IKEA
attempts to enter that market, as it would dilute the company brand.
♦ However, in my Expert Choice model, the one group that these recommendations do not reach
are the families. While this group is budget-conscious, they are juggling jobs and children and
need more convenience. IKEA might want to explore adding certain services, like home delivery
or improving the sales rep to customer ratio.
IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden, named as an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home parish (Agunnaryd, in Småland, South Sweden).[3]
The groups of companies that form IKEA are all controlled by INGKA Holding B.V., a Dutch corporation, which in turn is controlled by a tax-exempt, not-for-profit Dutch foundation.[4] The intellectual property of IKEA is controlled by a series of obscure corporations that can be traced to the Netherlands Antilles.[5]
INGKA Holding B.V. owns the industrial group Swedwood, which sources the manufacturing of IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding B.V. is wholly owned by Stichting INGKA Foundation, which is a non-profit foundation registered in Leiden, Netherlands. The logistics center Europe is located in Dortmund, Germany and Asian Logistic center is located in Singapore along with its IT base.
Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and trademark, and there is a franchising agreement with every IKEA store in the world. The IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered in Luxembourg, which in turn is part of Inter IKEA Holding registered in the Netherlands Antilles. The ownership of the holding companies has not been disclosed.[5]
The company which was originated in Småland, Sweden, distributes its products through its retail outlets. As of October 2010, the chain has 313 stores in 38 countries, most of them in Europe, North America, Asia and Australia. The IKEA Group itself owns 276 stores in 25 countries and the other 37 stores are owned and run by franchisees outside the IKEA Group in 16 countries/territories.[6] 2006 saw the opening of 16 new stores. A total of at least 15 openings or relocations are planned for 2010.[7]
♦ Anders Dahlvig, IKEA group president, needs a strategy to keep IKEA’s growth in the United
States on track.
♦ This recommendation will be written for Mr. Dahlvig from a consultant’s point of view.
SWOT Analysis
♦ Strengths
o IKEA’s flat packaging reduces costs and makes it easier for customers to transport
o The company culture matches its external image – pragmatic, cost-saving sensibilities
o Product design – sleek, minimalist design is popular in Europe; gained popularity in the
U.S.
o Strong in-store experience – unique, experiential, “modern theme parks”
o Brand reputation – in America, people lined to get into newly opened stores
♦ Weaknesses
o Foreign company trying to sell to an American audience – it’s difficult to understand
American attitudes and tastes if you’re not from the country
o Niche market – the minimalist design doesn’t appeal to everyone
o Too strong of an emphasis on cost-saving could lead to cutting corners and negatively
affecting safety
o Product and style selection is limited.
♦ Opportunities
o The budget shopper market is growing, especially among college students and in
metropolitan areas
o In-store restaurants are popular, having grown to be the nation’s 15th largest food chain in
America
o Now that product design has been tailored to American preferences, there is an
opportunity to add “bonus” services to increase customer service and satisfaction
♦ Threats
o Plenty of competition. The furniture retail segment is highly fragmented and IKEA is
flanked by competitors in high-end specialty retailers and low-end discount retailers.
o Discount retailers sell on the basis of price, bringing down margins and making it
difficult to stay profitable.
Issue Identification
IKEA wants to have 50 stores in operation in the United States by 2013 and needs a strategy to sustain its
growth.
Alternatives
♦ Focus on customer service
o Add more services to enhance customers’ experience (e.g. home delivery, interior design
consultants)
o Implement a customer relationship management (CRM) system to track current
customers and communicate with them. Build up customers over a lifetime.
♦ Keep Scandinavian brand and focus on correct placement of stores
o Concentrate stores in metropolitan areas, where apartments are smaller and the
population more transient
o Concentrate stores in college areas with the budget-focused students
o Continue clever advertising to create demand
♦ Expand product lines to flank the budget line with a higher-priced line
o Open up a chain of smaller stores with a more specialty retailer feel
o Create a higher-end product line to appeal to the more suburban market, which is less
likely to change furniture frequently
♦ Emphasize a “pull” marketing strategy by launching a campaign that promotes furniture as a
fashion statement
o Clever advertising and promotion
o Your furniture says something about you. And like fashion, your style changes – so can
your furniture.
Pro/Con Analysis
♦ Focus on customer service
o PRO: Creates a stronger bond with the customer and helps IKEA identify trends in
customer tastes and preferences. Additional services like home delivery or interior design
consultants make the large stores less intimidating for consumers, broadening its
consumer base and appeal.
- IKEA has a profile on its typical shoppers but could benefit from more in-depth
knowledge about them
- Americans did not like IKEA designs at first. Staying in better touch with
customers will help the company avoid this problem in the future.
o CON: Implementing a CRM system is costly. These customer service ideas might also
dilute IKEA’s brand as a minimalist company and moves the company towards the
specialty retailer segment.
- The current model seems to be working and even without these services,
Americans are flocking to the stores. Are these really needed?
♦ Keep Scandinavian brand and focus on correct placement of stores
o PRO: The IKEA brand is already strong and has contributed greatly to its success so far.
This option plays to the company’s strengths. This is familiar territory, as IKEA already
knows its clever marketing and advertisements work. The typical IKEA customer is
concentrated in certain regions of the country, specifically in urban and university areas.
- Tweaking the brand will only weaken it.
- The price, product and promotion mix already works. Correct placement is key to
IKEA’s future growth.
o CON: This option might be too narrow to help the company widen its market appeal and
scope. The opportunity costs could be significant, since the majority of Americans do not
live in cities.
- Not everybody wants to assemble their own furniture or transport big packages
(even if they’re flat) in their cars.
♦ Expand product lines to flank the budget line with a higher-priced line
o PRO: Helps IKEA penetrate a new market. In the specialty retailer market, the profit
margins are greater. IKEA will have to improve its customer service in these stores.
- Lessons learned in customer service here might be leveraged in its current stores.
o CON: IKEA has never operated a high-end retail store. To avoid diluting the IKEA
brand, this new line might need its own name and promotion campaign, which is cost
prohibitive.
- This strategy run counter to IKEA’s promotion to encourage Americans to
change their furniture.
♦ Emphasize a “pull” marketing strategy by launching a campaign that promotes furniture as a
fashion statement
o PRO: Leverages IKEA’s ability to create clever marketing and advertising campaigns.
Creates a “pull” for its products and style. An integrated marketing plan will emphasize
category need, raise brand awareness, craft the right brand attitude, and encourage
consumers to make the purchase.
- Other non-clothing items have managed to craft an “image” of fashion, like
iPods, cell phones, even some automobiles.
- A strong plan will ensure consistent messaging, which is very important in a
company’s hyper-growth phase.
o CON: Expensive! This kind of marketing is also difficult to implement, especially for a
non-American company.
- Americans might still be too attached to their furniture for this option to be
successful.
- Furniture isn’t as easy to change as clothing, which can be easily discarded.
Recommendation
♦ Given the four alternatives above, IKEA should implement the second option – focusing on store
placement. However, the company will also benefit from a strong integrated marketing
communications plan, as outlined in the fourth option. The American market is fickle and hard to
please; without an IMC plan, the company runs the risk of losing mindshare or sending mixed
messages.
♦ With respect to revenue streams, this option will place IKEA stores in areas that are convenient
for its target markets, who live in metropolitan areas and colleges, by making it easy for them to
come to the store and make purchase. IKEA ought to focus on those areas where the populations
are transient and move houses frequently. It will also capitalize on IKEA’s high-value consumers,
by staying in touch with them and encouraging them to return.
Implementation
♦ IKEA must carefully identify cities in which to build its new stores. Current stores seem to be
concentrated in California but there is huge opportunity in select cities in middle America and the
East Coast. I would recommend exploring options like Denver, Colo., Austin, Texas, and Atlanta,
Georgia. It is critical that IKEA does not lose sight of its target market – consumers who
“traveled abroad, liked taking risks … was an early adopter of consumer technologies.”
♦ The company should also concentrate its stores in college areas, especially metropolitan colleges
and universities. Size and space constraints in these areas might preclude IKEA from opening a
store in the downtown area, but consumers seem willing to travel a little bit out of the way for the
products. Instead of a store in Washington D.C., for example, one could be built in Virginia.
♦ The integrated marketing plan needs to be bold, clever and innovative. The idea is to encourage
consumers to use their furniture as a fashion or style statement – this mindset will bring
consumers into IKEA who want both function and form, which are two of IKEA’s strengths. This
will also encourage consumers to change their furniture or home accessories, as the styles and
fashions change. These consumers consistently upgrade their laptop computers, buy the latest cell
phone, etc. IKEA products are less expensive than those other items.
♦ The IMC should include non-traditional media channels, as well. I would recommend focusing on
clever Internet ads, since that is likely the main communication vehicle for the target
demographic.
♦ In Expert Choice, these recommendations do the most to grow the urban and budget-focused
demographics. It does not reach the high-end consumers, but I would not recommend that IKEA
attempts to enter that market, as it would dilute the company brand.
♦ However, in my Expert Choice model, the one group that these recommendations do not reach
are the families. While this group is budget-conscious, they are juggling jobs and children and
need more convenience. IKEA might want to explore adding certain services, like home delivery
or improving the sales rep to customer ratio.