IKEA Marketing Analysis - Case Study Example

of the of the IKEA Marketing Case Study Introduction IKEA story began in 1943 in the Swedish village of Agunnaryd when Ingvar Kamprad, founder of IKEA, was only 17 years old. Since then, the IKEA Group has evolved into a worldwide brand of retail sales, with 127,000 employees in 41 countries and an annual turnover of 23.1 billion in sales. It is said that in Europe there are no houses or apartments where they would not find things that can be produced by IKEA. This statement is very similar to the truth (History of IKEA, 2010). The main competitive advantage of IKEA is to produce low-cost high-quality products with a simple design and related products to them. Low prices persist due to the lack of such services as credit, delivery and assembly of furniture. The company develops its own furniture design and control of a certain types of providers. IKEA is a major developer with experience, i.e., invests heavily in the construction of the largest hypermarkets (IKEA. 2011). IKEA uses a new method of production and distribution of furniture, which consists in the fact that the furniture is manufactured as a separate element, and then developing the design business organization, and the user performs assemble furniture. With its stores in the country and saving on rent, IKEA keeps the price low. All stores have a mother and child room, children’s room, which is very convenient for women with children, because 60% of customers visiting IKEA are women. Stores are based on the type of the labyrinth: from input to output is one road that passes through all departments. Buyers have the opportunity to jump over several departments, but not always. In addition, a unique corporate spirit IKEA is also a competitive advantage for the company, which tends to look more original than its competitors and to avoid problems (IKEA. 2011). (IKEA. 2011) Therefore, in this paper, I am analyzing the marketing situation of IKEA in effective and efficient manner. Situation Analysis of IKEA The external environment of IKEA The general Environment Demographic: IKEA is mainly targeting the middle income earners from different regions of the world like from Asia, Europe, USA and Australia (Innovation Leaders, 2011). Economic Condition: It is noticed that the European crisis have caused a lot of strains worldwide. Therefore, IKEA is also facing these economic circumstances from its external environment. Socio-cultural Condition: It is noticed that due to changing fads and trends, people are preferring to buy branded products and because of this the perception of person’s lifestyle changes. Technological condition: Now there are many new and innovative technological furniture manufacturing machines and design equipments are available. With the help of advanced technologies, IKEA is able to enhanced its products and attain competitive edge over the competitors (Suarez, 2006). Industry Environment Analysis Porter’s five forces of Competition Threats of New Entrants: As it is noticed that in this industry, there are no barriers of entry but competition intensity may drive away the new entrants. In order to compete in the industry with big brands like IKEA, new comers must invest a great amount in the business, encourage the greater associations with the potential customers, and most important is to select competitive and suitable outlet locations. Therefore, the threat of new entrants is high due to fewer regulations, but this threat is not immediate because of greater level of competition in the industry (Hitt, Duane Ireland & Robert Hoskisson, 2012). Bargaining power of Suppliers: From the present trends in the industry, the bargaining power of suppliers is low. Across the world, IKEA has thrived in maintaining and attaining well formed associations with the suppliers. On the other hand, IKEA has its own manufacturing organization. Due to these facts, suppliers have the very less power of bargaining, and can be obliged to congregate the conditions of IKEA. Bargaining Power of Buyers: There are numerous choices and other alternatives are present for the consumers in this industry. Therefore, the bargaining power of buyers is high (History of IKEA, 2010). Threats of substitute products: It is important for IKEA to updates its products in effective and innovative manner in order to avoid losing the brand identity for products design. The threats of substitute products are somewhat high for IKEA. Therefore, it is important for the organization to upgrade the product design to capture the market. Rivalry among competing organizations: the industry is very competitive because of low price products. Galiform and Wall mart are the main competitors of IKEA. In order to compete with the competitors, IKEA is on the continuous basis entering into new markets (Hesterly, William & Barney, 2015). SWOT analysis Strengths IKEA is a powerful worldwide brand which is targeting the main groups of consumers. IKEA is offering a range of well formed and effectively functioning products at very reasonable prices. The company is engaging in the cost effective strategies. Use innovative ways of marketing strategies and also entering into new markets to capture the market. Key performance indicator (KPI) is used by IKEA in order to measure its current strengths (History of IKEA, 2010). Weaknesses The main weakness of IKEA is the controlling of quality and standards of its products. Some of the products of the IKEA are expensive; therefore, there is a need for low cost products. Sometimes there is a lack of communications; therefore, there is a need to keep effective form of communications with the stakeholders and consumers about the activities related to environment(Suarez, 2006). Opportunities The demand for the greener products is increasing. The demand for low priced products is also increasing; therefore IKEA has an opportunity to product low priced products in order to capture the low priced markets. demand for reduced water usage and lower carbon footprints Threats Due to the changes in the trends of the society, customers may have a preference for buying furniture pieces linked with higher class in society. The image of the brand might also face problems due to the poor working conditions of contractor organizations of IKEA in developing countries. There is a fear of economic crisis in United States, which may negatively influence the financial condition of IKEA (Introduction to global strategic management, 2006). Assumptions and missing information From different studies it is noticed that IKEA is facing problems in entering into new international markets. It is noticed that when IKEA entered in new market, it faced problems due to lack necessary homework in order to conduct enhance business activities. Therefore, IKEA is facing this issue on the continuous basis due to cultural differences and lack of marketing strategies to enter in a new market (Hitt, Michael, R. Duane Ireland, and Robert Hoskisson, 2014). This shows that when IKEA enters in a new international market, it is facing the internal management issues and external market issues. Statement of the problem The success of the company IKEA, based on the main marketing strategies that remain the same throughout the world and include the catalog, which is printed in 17 languages for 28 countries. IKEA company logo is blue and yellow - the color of the Swedish flag. Also, the combination of low prices and with an emphasis on freedom of choice of the client with respect to the purchase of goods for the home, designed to create a sustained commitment to the company’s customers. But on the other hand, IKEA is facing different challenges in the international market due to the internal management issues and external marketing issues. IKEA encountered the greater problems in terms of the business and culture practices as well political and socio-economic circumstances in the international market (IKEA. 2011). Development of alternatives In order to cope with the challenges in the international market, IKEA has developed different units of manufacturing in the international market in order to make the price affordable. Due to the reason of region specific form of environment, organization decides to implement the concept of franchising in the international market. On the other hand, IKEA organization has also built the company stores near the lines of public transportation in different parts of the region. IKAE is also implementing different marketing strategies in the international market in order to target the desired market. Evaluation of alternatives and recommendations In order to cope with these issues, it is important for IKEA to take corrective actions immediately. Following recommendations are important for the success of IKEA in the international market. As it is observed that the style of management is quite informal in IKEA. The management style of IKEA is not working effectively in the different parts of the globe. Therefore, it is important for the organization to alter the business cycle in accordance to the cultures of countries. In order to capture the market of any other international country, then for the effective organizational operations competent human resource management team is important for the IKEA. This HRM team will assist the organization about different cultures and situations. On the other hand, it is also significant for IKEA to mainly focus on the wants and desires of the customers rather than just reducing the prices of the products. In order to attain a competitive edge in the new market IKEA could become a more customer focused organization. With the help of this strategy, IKEA will be able to produce more innovative and customer focused products and through which it can attain higher level of competitive edge in the international market. The most important alternative is to take corrective actions for improved marketing strategy. Innovative and useful marketing strategies are required in the international marker in order to capture the attention of the more target groups at lower cost. This demonstrated that the proper form of effective internal and external management of organization will lead to the satisfied and happy customer base. Work Cited Hesterly, William, and Jay B. Barney. Strategic Management and Competitive Advantage Concepts and Cases. Pearson Higher Ed, 2015. History of IKEA. (2010). Retrieved from http://www.ikea.com/ms/en_AA/about_ikea/the_ikea_way/history/index.html Hitt, Michael, R. Duane Ireland, and Robert Hoskisson. Strategic Management: Concepts: Competitiveness and Globalization. Cengage Learning, 2014. Hitt, Michael, R. Duane Ireland, and Robert Hoskisson. Strategic management cases: competitiveness and globalization. Cengage Learning, 2012. IKEA. (2011). Retrieved from http://www.ikea.com/ms/en_US/about_ikea/the_ikea_way/our_business_idea/index.html Innovation Leaders. Profile: IKEA (2011).. Retrieved from: http://fp05-527.web.dircon.net/ ikea_company_profile.html Suarez, F. International Business Strategy IKEA. Solvay Business School (2006) http://www.actuarisk.be/files/IkeaSite.pdf The IKEA way. IKEA history(2011). Retrieved from: http://www.ikea.com/ms/en_US/about_ikea/ the_ikea_way/index.html Introduction to global strategic management . IKEA: case study (2006). Retrieved from: http:// www.oup.com/uk/orc/bin/9780199266159/mellahi_ch01.pdf Read More