Strategic Management

Final Project Report

Industry:

Home Furnishings & Fixtures

Company:

IKEA

By: Anshuk Pradhan

U113072 Sec-B

Table of Contents
Q1. Comparison of business model.......................................................................4
Detailed Analysis:............................................................................................... 4
Ikeas Concept of cost efficiency........................................................................4
Ashley Furniture:................................................................................................. 5
Godrej Furniture.................................................................................................. 6
Q. 2 Activity System Map....................................................................................... 7
Activity System Map for Low Cost Organization.................................................7
Activity System Map Analysis:............................................................................8
Activity System Map for Diversified Organization...............................................9
Q. 3 Low Cost Providers as well as the leading Organizations with Diversified
Product/ Service Providers for India and for the 5 Continents..............................10
India:................................................................................................................ 10
ASIA:................................................................................................................. 10
North America:................................................................................................. 10
Europe.............................................................................................................. 11
Latin America................................................................................................... 11
Q. 4...................................................................................................................... 12
4.1.1 PESTEL Analysis.......................................................................................... 12
Political............................................................................................................. 12
Economical....................................................................................................... 12
Social................................................................................................................ 12
Technological.................................................................................................... 13
Environmental.................................................................................................. 13
Legal................................................................................................................. 13
4.1.2 Porters Five Force Analysis.........................................................................14
Competition within the Industry.......................................................................14
Bargaining Power of Suppliers..........................................................................14
Bargaining Power of Buyers.............................................................................. 14
Threat of New Entrants..................................................................................... 14
Threat of Substitutes........................................................................................ 14
4.1.3 SWOT analysis............................................................................................ 15
Strength............................................................................................................ 15
Weakness......................................................................................................... 15
Opportunities.................................................................................................... 16
Threats............................................................................................................. 16

4.2 Competitor of IKEA........................................................................................ 16

Introduction of Ashley Furniture....................................................................16
Business Level Strategies of Ashley Furniture...............................................17
Strengths:...................................................................................................... 17
Weaknesses:.................................................................................................. 18
4.3 Complementors............................................................................................. 18
Q. 5...................................................................................................................... 19
5.1 Comment on the History, Evolution, Growth Rate, Profitability Rate &
Future of the Industry in which the Organization is operating. How has it been
for Organization as well.................................................................................... 19
History.............................................................................................................. 19
5.2 Growth Overview:....................................................................................... 20
Size of the industry across the world................................................................21
Regional Market Share...................................................................................... 22
Market Outlook................................................................................................. 23
5.3 Key success factors for any organization operating within the Industry and
how is your organization performing on those criteria.....................................23
References:.......................................................................................................... 25

Q1. Comparison of business model

A. An International Organization with a similar Business Model

For this comparison I have selected Ashley Furniture as a

competitor of IKEA.

B. Domestic Organization with a similar Business Model

For this comparison I have selected Godrej Furniture as a
competitor of IKEA.

C. A Government Organization within the same industry

No example of a government company could be found which
operates in same industry.

Detailed Analysis:
Ikeas Concept of cost efficiency
IKEA, as a basic concept what to keep it costs as low as possible .that is
why it is able to provide to many people an access to affordable
contemporary design. At the same time it provides them with good taste
and recognizes value. It tells a life style Kamprads credo of creating a
better life for many is almost evangelical. Ikeas culture includes steely
competitiveness, relation cost-cutting. It goes deeper even it wants to hit
rivals in certain segments. It helps that frugality is ingrained in the
corporate DNA as the obsession with design. No matter how impaired and
appreciated finds its way into the obsession with design. The cost
obsession fuses with the design culture-both are inseparable, no design,
no matter how empires and appreciated finds its way into the showrooms
if it cannot be made affordable. Designess and in house production teams
work hard or identify the appropriate materials and least costly supplers.
Ikea work hard to find the right manufacture for the right product
.Simplicity helps keep costs down. Nearly all the big items are flat. Packed

which saves shipping costs and enables shoppers to have their own staff
home. I keas designers are looking for innovative use for discarded and
unusual materials. This low cost philosophy may be target to global
middle class but not the affluent society like the japans and Americans.
Strategic Pillars in Business Model:

Low Cost Strategy.

Focus on Ready to Assemble Furniture
Bulk purchase and minimal cost production technology.
Innovative marketing strategy
Big stores in suburban areas to capture the market.
Limited or minimal customer support.
Global presence.

Ashley Furniture:
The major difference in the strategy of both the companies was the target
segment that they were addressing. Ashley furniture was never a ready to
assemble furniture seller. Rather they were more into good quality but
higher prices model, where the customer was willing to pay more price for
a model but did not want to compromise on the quality of items. Ashley
furniture also had a more detailed section and variety rather than just RTA
furniture. As a result of the state of the art designs in the in house
production centre. It distinguished it from IKEA.

Business Model of Ashley Furniture

Strategic Pillars in Business Model:

High Customer focus

Not restricted focus on low cost but overall focus on quality.
Not tagged as Scandinavian Store moving in diverse business
areas other than Ready to assemble.
Focus on customer satisfaction and provide good customer support.
Big stores in sub urban cities to capture demand.
Not present globally.

Godrej Furniture
Godrej Interio is Indias largest furniture brand. From manufacturing the
humble Storwel cupboard 80 years back to being a vibrant, innovative
brand with a diverse portfolio.
They love bringing alive your dream space. They emphasize comfort and
aesthetics while delivering well designed, fun and functional furniture
solutions to you. True to the Godrej mission to conserve the environment,
they design products, set up processes and use raw materials that are
eco-friendly to do our bit to preserve natural resources. They offer our
customers home and office furniture, along with solutions for laboratories,

hospitals and healthcare establishments, education and training institutes,

shipyards and navy, auditoriums and stadiums. They are present across
India through our 50 exclusive showrooms in 18 cities and through 800
dealer outlets.
Godrej Interio is a business unit of Godrej & Boyce Mfg. Co. Ltd. - part of
the Godrej Group, one of Indias largest engineering and consumer
product groups. Godrej Interio is more of a luxury brand that caters to the
interior requirements of upper middle class and upper class households in
the country. Unlike IKEA and Ashley Furniture it is not a giant fish in the
market because the furniture market is primarily unregulated and
unstructured in India. It is still dominated by traditional methods of
furniture making.
Godrej saw an opportunity and launched its furniture section. It met good
response and quickly dominated the market. They also provide
dedicated interior solutions to the customers which the other two
dont.
Strategic Pillars in Business Model:
Premium brand. Not a low cost and budget brand for the customers.
Latest and modular designs. Caters to young households.
Provides other products that go along with furniture like kitchen

appliances and homecare appliances.

Not present globally but have good presence across the country.
Not at scale which is comparable to IKEA or Ashley Furniture. It does
not has large outlets and stores.
Focus on niche designs and high value assortment.
Provide dedicated solutions to the customers.

Q. 2 Activity System Map

Activity System Map for Low Cost Organization
One of the most important step of business strategy is to determine
its core competences. Core competences are the internal capabilities of your
company and they may or may not be valued by the outside world.

IKEA has an original approach to deal with customers: it employs the self-serving
method. Customers chose their products, take them out of the shelves and

assemble them at home on their own. Although this approach is quite unusual in
the furniture business the customers are willing to do that because of the low
prices, the easy to handle and storable flat packages and simple constructible
furniture. With this limited customer service IKEA safes sales staff and customers
dont have to wait long to be served.

Activity system map gives a clear picture of the activities of the company. In this
clusters of activities and processes which support the core competences are
linked. Such a map makes it clear how a companys activities are interlinked. In
the activity diagram the core competencies are shown in dark boxes.

Figure 1: Activity Diagram- IKEA

Activity System Map Analysis:

1. Limited Customer Service
a. Limited sales offering and the company covers limited warranty for
the goods sold to the customers.

b. The catalogues provided to the customers are detailed and contain

information so it reduces the sales assistance required at the
showroom.
c. Self-assembling furniture saves the cost of assembling the products
and their maintenance cost.
2. Modular Furniture Design
a. The furniture design are in house design and innovative to address
the demands of variety of customers. It differs from providing only
the conventional products to the customers. The focus is to optimise
the space to maximum.
b. It also increases the likelihood of retaining the customers and
making them a loyal customer.
c. Easy transport and assembly instructions are provided to the
customers.
d. The furniture is mostly self- assemble and comes with instructions
to assist the customers. It saves the cost for the company.
3. Low Manufacturing Cost
a. The furniture is mostly self- assemble and comes with instructions
to assist the customers. It saves the cost for the company.
b. The company procures the furniture from the long term suppliers
which have agreement with the company
c. The company also benefits from excellent operations planning. The
inventory management system manages the inventory at optimum
levels across the year to keep the costs low. This inventory is
managed at the site to reduce the transportation cost to the sites.
4. Self-Selection by Customers
a. This is the prime driver of their business as the customers come and
select the furniture of their choice. The sites are located in suburban
locations with large parking spaces so that the customers can bring
their own vehicles and take the goods.
A failure of any of these activities may have an effect on the core competence,
and therefore on the companys overall success and competitive position.
Once we identify the companys core competences and contributory activities we
may consider market research to help your company align these to the needs of
the market. The role of market research is, therefore, to find out what is valued
and what is not.

Activity System Map for Diversified Organization

For a diversified organization the activity system map will be different as
the focus will not be only on cost saving but providing the complete
solutions to the customers. The core competencies can be different or
same based on the nature of the company. For example we are selecting
the Activity System Map for Diversified Business

Transportation
Provided
Catalogues and
Display

Extensive
Customer
support

Impulse and
dedicated
buying

Vast Range
of choices.
Optimum level
of planned
inventory

Extensive sales
staffing
Transportation
Provided
Variety brings
customers
Wide Variety
and easy
manufacturing

Non
modular
and Modular
design

Manufacturing
process
optimization

Quality at
affordable
prices

Wide range of
designs

Year round
stock.

Wide Variety
and easy
manufacturing

Q. 3 Low Cost Providers as well as the leading

Organizations with
Diversified
Product/
Service
Providers for India and for the 5 Continents.
India:
Low Cost Provider:

Mission: Well seek aggressive, but controllable growth, through

new product introductions, superior quality and service, and greater
manufacturing capacity through innovative process improvements.
We will continue to introduce sustainable business practices with
materials, products and processes
Vision: Its all about the people: Customers, Employees, Suppliers
and Stakeholders. We will make it easier for our customers to
partner with. There will be no such thing as a special. Innovative
technology will allow us tremendous flexibility in producing office
furnishings.

Diversified Service provider: Godrej & Boyce Mfg. Co. Ltd. (Godrej
Furniture)

Mission: Enriching Quality of Life Everyday Everywhere

Vision: Godrej in Every Home and Workplace.

ASIA:
Diversified: Shenzhen Coco Furniture Co.,Ltd
Low cost Providers: Amat-3:

Mission: To satisfy all those users who have chosen Amat to furnish
their spaces. To look after the requests and needs of interior design
professionals. To create new products with an original design,
functional and ergonomic.
Vision: constantly improve our team, the organisation and the
production facilities.

North America:
Diversified: Ashley Furniture

Mission: Why do more people buy Ashley than any other single
furniture brand? Because at Ashley Furniture Industries, we know it
takes more than just the ability to make good furniture to become
the #1 selling brand of home furniture in North America
Vision: To satisfy the customers needs without compromising on the
quality of the products and make it affordable for everyone.

Low cost Providers: Target:

Mission: We save people money so they can live better.

Vision: If we work together, well lower the cost of living for
everyonewell give the world an opportunity to see what its like to
save and have a better life

Europe
Diversified: Calligaris

Mission Statement: Quality at a convenient price. This is the image

which Calligaris conveys worldwide. By honouring tradition,
respecting ethics and working with dedication, Calligaris can truly be
said to be a peoples company.
Vision: To be Reliable Ingenious Accessible and Vital from a
customers perspective.

Low cost Providers: Actona:

Mission: Bringing Home Value explains how we want to run a

company. All of our business relations suppliers retailers must
experience Actona Company as a creative partner
Vision: Actona is simply short for Act on A, which we normally
explain as reacting immediately, show readiness or even better
be abreast of the development

Latin America
Diversified: Rotta Furniture
Low cost Providers: Renar Furniture:
RENAR - The name was created in 1919 when the European
immigrants Rene and Arnoldo frey united their initials and their dreams to
build a new life in Brazil.

Mission: The quality of its human resources and the valorization of

teamwork are the main principles which orient the development of
the total quality production.

Q. 4
4.1.1 PESTEL Analysis
Political

The level of corporate tax and consumer taxation regulated by political

authorities of any country affects corporations after-tax income. The rate of
corporate tax impacts profits, hence lowering after-tax income. Hence, IKEA
regional profits are subject to regional tax laws. However the specific
characteristic such as subsidiary model of the furniture retailer also plays a
major role in the actual tax rate. It is also learnt that corporate tax rate
impacts the structure of the business. IKEA business structure, a subsidiary
model propels its subsidiaries to abide by regional tax laws.

Tariff and trade barriers also impact businesses. Some of the major reasons
for imposing tariffs and trade barriers such as protecting local employment,
new industries, consumers, retaliation and national security, tariffs increase

the prices of imported products into the country. This benefit the local
producers who are not forced to reduce their prices, however local consumer
pay higher prices. Considering the case of IKEA and its reliance on local
manufacturers for its products rather than importing products into the local
market, tariffs and trade barriers seemingly have little influence on its
business profits.

Political stability of any country affects business operations. In the midst of

political instability of a country, negatively affects business and consumer
perception of the corporation.

Economical

Economic growth of individual markets has its influence on businesses. For

example, rapidly growing economies provide higher standard of living and
higher employment rate. As a result, consumers disposable income
increases and so does their purchase power, ultimately benefiting business
profits. In particular with the emerging economies showing high potential of
economic growth, provides a promising future for corporation such as IKEA.
Other factors such as cost of labour also impact business success. In regions
such as India and China popular for their low-cost yet skilled labour, provides
IKEA with a wide profit margin.
Inflation rate is another important factor affecting business and consumer
experience. For instance, high inflation rate such as in the UK deforms
consumer behaviour, destabilising markets and generates avoidable
shortages of resources. Similarly, in countries with high inflation rate, trade
unions demand higher wages, distorting the entire value chain.
Market trends should be closely observed to make strategic decisions
benefiting the business.

Social

Social factors such as modifications in demographic variables like income,

age, family size etc. of different countries significantly influence the strategic
decisions made by the business. As an example, ageing population is less
likely to buy furniture whereas younger generation would demand trendy
furniture that should also add value to their purchase.
Demand of certain products is controlled by changes in demographics. As an
example, a major shift of rural population to urban areas due to job creation
indicates higher demand of less costly products for new families to get
settled.
Cultural factors, fashion trends and consumer behaviour also regulate
demand trendier, less bulky, and easy-to-assemble furniture.
Reduced income levels place furniture purchase at less priority.

Technological

Emergence of technology particularly popular with in the retail sector such as

RFID and online and mobile shopping, has immensely benefited corporations.
RFID helps businesses to reduce their cost of operations through inventory
shrinkage, smart labelling, self-stocking, efficient checkout process etc.

Further on easy access to retailers online stores provides enormous selling

opportunities for the seller. In addition, technological innovations in the retail
sector like consumer mobile payment, and mobile gift cards promises
consumer to experience easier, and reliable means of payment.
The increasing popularity and reliance of businesses on social media as an
unconventional marketing channel, benefits firms by increasing awareness
and reach amongst target market, marketability factor, increased website
traffic, ability to develop community and relationship with customers and so
forth.

Environmental

Factors such as ethical business operations demonstrating sensitivity and

accountability towards carbon-emission, forestry, community development,
and supplier conduct issues are significantly important for business success
and sustainability.
Industrial giants such as IKEA are constantly scrutinised for their contribution
towards carbon emission, disposal of hazardous manufacturing waste in the
environment, recycling, and supplier behaviour. Therefore local governments
ensure that environment can be protected, compelling businesses to meet
specific standards to reduce the adverse effect of business activities.
Compliance with these regulations is one of the most essential success
factors.

Legal

Consumer protection legislations restrict the business in terms of what they

are permitted to do along with adding cost to business operations. This
means that products that are manufactured must comply with the consumer
protection legislations of respective country of operations. So the additional
costs come from changing business practices, compliance with the law,
damaged reputation and image within the consumer market etc. that is
ultimately borne by the corporation.
Other legislative requirements such as employee protection, health and
safety at work etc. demand proximity of business objectives with the local
legislations. For instance, IKEA is lately accused to be contradicting with its
Group values, when the Saudi version of retailers catalogue airbrushes
women model out. Even though the company was complying with local laws
against advertising women in Saudi Arabia, nevertheless accusation of
contradicting with its Group value is likely to alter consumer perception
towards the corporation.

4.1.2 Porters Five Force Analysis

Competition within the Industry
IKEA has high competition within the industry from Ashley Furniture,
Galiform, Wal-Mart, John Lewis and Homebase. But the global brand
name and trust in customers about product quality, cost
effectiveness, and immensely popular design has given IKEA a
competitive edge.
Growing markets made IKEA diversify its business empire into food
and textile industry.
IKEA also went into the mobile industry by offering cheap and
flexible non-contract mobile services for its customers, which is very
unique and unheard of in this industry.

Bargaining Power of Suppliers

Switching cost of suppliers in the industry is classified as Low Risk

as their internal suppliers determine the standards for contracted

suppliers so that switching from one to another should not produce
high costs. Suppliers have not gotten any major bargain power as
IKEA is a well-established brand in the market.
Suppliers tend to gain more by coming into a business relationship
with such a high value retailer
the number and size of suppliers is considered a large risk as there
are thousands of suppliers available

Bargaining Power of Buyers

Buyers have a high power of bargaining. Most often, competition in
retail market gives the buyer plenty of options to choose from based
on price, services and design.
Recession has forced retailers to become more competitive in
pricing to attract people who are reluctant to spend more for home
improvements

Threat of New Entrants

The threat of new entrants is low since it is well established as a
global icon. Customer loyalty has helped in improving this
competitive advantage in retail market.
IKEA has a huge market presence over Europe, US, Asia and
Australia. It is virtually impossible for any new entrant to pose a
threat to an already well connected business empire with

geographic and product diversity. But it Still faces competition from

Target, Grate & Barrel, Wal-Mart retailer.

Threat of Substitutes
The threat of substitutes is medium. Though there are a number of
substitutes in home furnishing industry, the low-to-medium income
customers tend to stick with IKEA due to the cost effectiveness.
IKEA has been criticized for poor customer service, stock availability,
product guarantee and lesser variety.
The all-in-one-shop concept in IKEA is not available in substitutes
like B&Q, DFS and Wickes.

4.1.3 SWOT analysis

Strength

The key strength of IKEA is application of strategic practices such as

optimising material to reduce manufacturing cost, development of
manufacturing plants to optimise use of recycled material.

IKEA is also considered as leading specialist in the retail furniture

manufacturing industry, with a strong brand image. The strong
global brand targeting key consumer groups, offers uniformity in
quality and product range across the globe. The right approach to
strike off balance between quality, design, functionality and cost,
gives IKEA cost and competitive advantage in the highly competitive
market.

Weakness
The size and scale of its global business. This could make it hard to
control standards and quality. Some countries where IKEA products
are made do not implement the legislation to control working
conditions. This could represent a weak link in IKEA's supply chain,
affecting consumer views of IKEA's products.
The need for low cost products. This needs to be balanced against
producing good quality. IKEA believes there is no compromise
between being able to offer good quality products and low prices.
IKEA needs to keep good communication with its consumers and
other stakeholders about its environmental activities. The scale of
the business makes this a difficult task

Opportunities

There is also an increasing demand in green (eco-friendly), and lowpriced products manufactured with sensitivity towards the
environments.

IKEA aims to reduce carbon emission, and achieve zero wastage

targets coupled with improved relationship with stakeholders,
suppliers and
consumers, that provides massive opportunities
resulting in business sustainability, competitiveness and higher
profits

Threats

The global recession and suppliers issues particularly threaten IKEA.

Furthermore, social trends showing lowered entrance of first-time
buyers into the housing market also affect furniture sale.
Increasing competition and lowered disposable income are factors
that motivate buyers to purchase low price furniture, even at the
cost of compromising quality. Threats such as these, demands the
furnishing giant to reform its value chain, and optimise innovative
technology in order to provide good quality at lowered prices.
Strategic development in this regard would also raise entrant
barriers into the industry, providing possibilities to maintain and
increase its market share.

4.2 Competitor of IKEA

Ikea faces some competition in the furniture market by companies like
Ashley Furniture, Galiform, Wal-Mart, John Lewis and Homebase. Out of
these Ashley Furniture is the biggest competitor of IKEA.
Introduction of Ashley Furniture

Ashley Furniture industries, Inc., founded by Carlyle Weinberger in

Chicago in 1945 just as a sales operation, is a furniture manufacturing and
distributing company, which headquartered in Arcadia, Wisconsin. Now
the father and son team Ron and Todd Wanek own the company.

Like many other furniture companies, Ashley Furniture Industries sells its
products, such as home furnishing, accessories through two main
distributions: one is independent channels; another is more than 400
Ashley Furniture Homestore retail furniture stores. All the stores are either

owned by the company or licensed to other businessmen in North America

countries, such as USA, Canada, Mexico, Central America and Japan.
The mission to become the BEST Furniture Company reflects its proud past
and shows the desire about future. And with over 60 years of innovation,
creation and experience in the furniture industry, the company already
became the leader in the industry which focuses on the quality of its
furniture products. At present, the company has manufacture plants
across the United States and Pacific Rim Countries, mainly in China
Business Level Strategies of Ashley Furniture

The successful strategies can be illustrated as following levels

Low price/ low added value: providing lower price than it can be
found elsewhere.
Low price: based on a high volume with low margin product to bring
cost leadership as its competitive advantage.
Hybrid: Compete on price and seek to keep the margin by
controlling the cost of products.
Differentiation without price premium: Competition is principally on
perceived benefits but not on price.
Focused differentiation: Using unique qualities without substitution
to get premium.

The Strategic Business Unit chose for this research is the living room
division of Ashley Furniture. The business model of Ashley Furniture is
different from other competitors, by establishing for over 65 years, the
main business model of Ashley Furniture is the company design, build and
deliver its own furniture, and the company is in control of all aspects to
make sure the good quality.
The cornerstones of its business models are quality, style, selection,
service. They are all the foundations for Ashley Furniture making every
decision and the guidelines and principles to help the company achieve
the mission statement of being the best furniture company.
Therefore, the main business model of Ashley living room furniture used to
get competitive advantage is using Hybrid, which means by the methods
such as outsourcing a series of its products from Pacific Rim countries to
cut the cost of furniture and adding value to the products by quality, style,
selection and service.
Strengths:
Good price to attract customers: After the recession of economy crisis in
2008, the price of goods, especially furniture, become the main

competitive advantage to attract customers to consume products on

company. As the main reason that led to the economy crisis is the
subprime lending which is related to the housing industry; and makes a
drop in the sales of houses in North America, mainly in US
Variety of products: this means that based on variety of products, Ashley
living room furniture is able to survive during the crisis. Even one product
fails in the market, there are still other products succeed in the market to
make up the loss that cost by the failure of that product. Besides, different
kinds of products make those brand loyalty customers to purchase more
and also increase the image of the brand. This helps the company achieve
the mission of becoming the best furniture company in North America and
even all over the world.
Maintain the gross margin: Obviously, this technique assist the company
to maintain the gross margin by controlling the cost of furniture. By using
Hybrid strategy, the division still possesses the ability to control the cost
of products. On the other hand, by adding more value through design,
build and deliver the furniture to the customers, the products of Ashley
living room furniture are still attractive.
Weaknesses:
More funds spent on implementing the strategy: In order to supply and
offer more furniture products to the customers, more funds will be spent
on Research and Development, Design to find more solutions offered to
the customers. Besides, the division possesses its own stores which cost
much of its capital on investing in purchasing fixed assets, which may
become a potential problem to the cash flow of the company.
Competition of the similar products in the company: The Product division
provides more than 100 furniture products to customers to find out the
most suitable furniture for their living rooms. Therefore, this results in the
competition among the products within the same category.
Lack of quality: The business model of Ashley living room furniture
depends on the quality of products. If the company concentrates on
controlling the cost, such as the outsourcing price offered to those
manufacturing companies in Pacific Rim countries, which may affect the
quality of products of Ashley living room furniture. Then it will affect the
paradigm of the division in the industry and then reduce customer brand
loyalty.

4.3 Complementors
Complementors are businesses that directly sell a product (or products) or
service (or services) that complement the product or service of another
company by adding value to mutual customers. As the business model of
IKEA is such that it manufactures its own products and sells them directly
so it is highly unlikely that it will have any direct Complementors. For our
analysis we can say that the complementors can be from the industries
like

Bedding
o Pillow - Du Point, Sleepwell, Sleep innovations, Hudson Etc.
o Blanket and Quilt KESS Inhouse, CC Home furnishing.
o Mattress Pads & Toppers Simmons, Bergose Home Textile.
Dcor
o Clocks Horward Miller, Lexington Studio
o Candles & Candle Holders CC Home Furnishings, Oddity Inc.
o Artificial Plants and Flowers Allstate, Nearly Natural.
o Desk Lamps, Side Lamps Table Lamps.
Accessories
o Kitchen Accessories
o Bathroom Accessories
o Cookware and Bakeware tools

Storage & Organizations

o Kitchen storage. Pot Racks, Toys Rtorage.

Cleaning and housekeeping items

o Floor cleaning items Lizol, Dettol, Mr. Clean Etc.
o Vacuum cleaners and Carpet Cleaners Various companies
manufacturing them

This list is not exhaustive and products can be added based on the usage
of the furniture. As the vast variety of the furniture offered by the stores
this will have many complementors.

Q. 5
5.1
Comment on the History, Evolution, Growth Rate,
Profitability Rate & Future of the Industry in which the
Organization is operating. How has it been for Organization as
well
IKEA designs and sells ready-to-assemble furniture, appliances and home
accessories. Ready-to-assemble furniture (RTA), also known as knock-

down furniture (KD) or flat pack furniture, is a form of furniture that

requires customer assembly. Ready-to-assemble furniture is typically
packaged in a kit form with the pieces packaged in one or multiple boxes.
The kit may contain a number of flat parts, fasteners, fixings, and other
parts that are needed to assemble the furniture. A furniture assembly
industry has grown up around ready-to-assemble furniture and consumers
can engage a service provider to come to their home and assemble the
furniture they have purchase. As of January 2008, the company is the
world's largest furniture retailer.

History
Originally RTA furniture was known as KD for knock-down and
unfortunately the products came apart almost as easily as they were put
together. Substantial improvements in construction methods and
hardware have heightened product quality to its present consumer
friendly status of the 1980s. While RTA furniture has a long history in
Europe, the early introductions into the U.S. market were poorly
constructed compared to today's products. The original products were
vinyl-wrapped particleboard television stands and bookcases which sold
for under $40. The products were purchased as short-term, disposable
furniture, but the value was still good for the price paid. The industry
realized that long-term survival would entail increasing quality, design,
and function. Improvements have enabled composite board to be printed
with wood grains or coloured with coatings of paint or mela- mine. Since
assembly is not required and the machinery is automated, RTA furniture is
produced with less labour than conventional furniture. The initial
investment in equipment is recovered through reduced production and
labour costs. Packaging the product in boxes is the most labour intensive
step.

5.2 Growth Overview:

As the world economy is developing fast in the past 10 years, the furniture
markets have opened up more and the world furniture industry has been
growing fast. Over 70% of the global market has been taken up by the
traditional furniture making countries. This is possible because of their
long established production capacity, advancement in science and
technology, solid funds and rich management experiences. Meanwhile,
developing countries and regions like China, Southeast Asia, Poland and
Mexico, with China taking the lead, have built upon their respective
competitive advantages and gradually have covered almost 30% of the
world market. The furniture industry in such countries is developing
strongly and showing great potentials. The European Union furniture
industry accounts for about half of the world's furniture production. The
production value of this industry in this region is around 82 billion.
Considered to be a labour-intensive industry it provides employment for
around 1 million people. Among the European countries, Germany takes

the lead as the largest furniture producing country, accounting for about
27% of total EU production. This is followed by Italy (21.6%), France
(13.5%) and the UK (10.4%).The Canadian Furniture Industry is the 5th
largest exporter of furniture in the world. The major furniture producing
countries in South East Asia are Philippines, Indonesia, Malaysia,
Singapore, Thailand, Korea, Taiwan and India. In the context of global
furniture trade, Asia shows healthy signs of growth with respect to its
other international competitors. Asian furniture has always been popular
in developed countries like USA, Europe and Australia.
Over 20 years of fast growth, China has been able to bring unlimited
business opportunities and vitality to the global furniture industry. Now,
China has today emerged as a furniture production centre, a circulation
centre as well as an exhibition centre in the world. The rise of China's
furniture industry has brought about a new round of restructuring of the
global furniture industry and trade pattern. According to a recent
estimate, the Indian furniture industry is estimated at around 350 billion.
Eighty-five per cent of this falls into the unorganized sector. According to a
study by the World Bank, the organized furniture industry is expected to
grow by 20 per cent a year and India, Brazil and Russia will witness a
boom.
Profitability:
U.S. furniture imports increased 7.7% in 2013 to a total of $19.7 billion,
according to the most recent numbers from the U.S. International Trade
Commission. This years increase follows a 9.1% gain from 2011 to 2012;
a 0.3% bump between 2010 and 2011; and an 18.8% leap from 2009 to
2010.
Imports from China reached $11.6 billion last year, an increase of 7.4%
over the countrys 2012 figures of $10.8 billion. China comprised 59% of
the total furniture imported into the United States in 2013, 5.2 times
greater than the No. 2 importer Vietnam.
Imported furniture from Vietnam jumped 11.5% to $2.2 billion, while
shipments from Canada were $1.1 billion, an increase of 7.4%, and
imports from Mexico grew 10.7% to $965 million. Indonesia rounded out
the top five importers to the U.S., bringing in $601 million worth of
product last year.
Indonesia just edged out No. 6 Malaysia, who realized an 8.7% decrease in
shipments to $599 million.
U.S. furniture factory shipments were $23.2 billion in 2013, up 4.8% from
the previous year, per Smith Leonards latest survey of residential
furniture manufacturers and distributors. Data from industry analyst Jerry

Epperson shows that 65% of total upholstered furniture is made in the

U.S., while 36% of all case goods are made in America.
The analysts forecast the Global Furniture market to grow at a CAGR of
3.53 percent over the period 2012-2016. One of the key factors
contributing to this market growth is the boom in Real Estate industry. The
Global Furniture market has also been witnessing the production of ecofriendly furniture. However, the shortage of timber supply could pose a
challenge to the growth of this market.
The report, the Global Furniture Market 2012-2016, has been prepared
based on an in-depth market analysis with inputs from industry experts.
The report covers the market in the Americas, Europe, and the APAC and
MEA regions; it also covers the Global Furniture market landscape and its
growth prospects in the coming years. The report also includes a
discussion of the key vendors operating in this market.

5.2
Size of the Industry across the world and the country
where the organization is operating
Size of the industry across the world
The worldwide bed and bath furniture industry is expected to reach almost
$28 billion by 2015, according to Global Industry Analysts. Market growth
will be fuelled by recovery in the housing sector, with increased
construction activity leading to higher consumer demand for home
decoration products. Developing markets such as Latin America and AsiaPacific are expected to record rising demand over the coming years for
colourful, vibrant bed furnishings.

Premium high-end beds made using materials such as hand-tufted

horsehair, memory foam, silk, latex, flex, cashmere and lambs wool will
be in growing demand over coming years. The baby boomer generation in
particular will opt for premium beds, attracted by their superior comfort
level. Manufacturers are responding to this demand by offering a wide
range of luxury beds and mattresses. Luxury towels are also in greater
demand, with consumers willing to pay extra for stylish colors and more
fashionable designs.

The worldwide lamp market is expected to exceed $40 billion by 2017,

reports Global Industry Analysts. Factors fuelling market growth include
urbanization, rising global population, and the phasing out of

incandescent bulbs across several nations sparking demand for

alternatives such as CLFs and LED lamps. Demand for lamps in other
applications including LEDs in mobile devices will also drive demand.

Companies are focusing on the benefits of new technology innovation to

offer consumers energy savings, cost reductions and more
environmentally friendly lighting solutions. This shift has led to a decline
in demand for conventional lighting options like electronic ballasts and
T12, HID fixtures, but has spurred a subsequent rise in demand for
integrated systems and solid-state technologies, including T8 and T5
fixtures and lamps.

Solid-state lighting controls facilitate more-efficient energy use, thereby

reducing overall energy costs. Due to the higher price of technology,
companies first target high-end markets when launching newer products
such as LEDs and CFLs, which are popular for their superior energy
efficiency and power.

Regional Market Share

The US carpet and rug industry is set to record strong growth over the
coming years, with demand expected to reach a yearly rate of 8%
between 2010 and 2015. By that time, industry volume should reach close
to 17 billion square feet, according to research from Freedonia. Growth will
be largely fuelled by recovery in the US housing sector and wider
economy. Expansion in the battered new residential construction sector
will also help drive demand for area rugs and tufted carpet. Increased
construction in the US will see consumers and businesses alike opt for
new carpet and rug products to furnish their homes and offices. Growing
consumer confidence and increased discretionary spending will see
demand from the residential sector grow, while the nonresidential sector
will be a source of demand due to expansion in commercial and new office
space. Replacement markets will similarly reflect economic recovery.
Nylon, the most used fiber in the manufacture of carpet and rug products,
is likely to remain the leading choice over the coming years. However,
polyester fibers are becoming more attractive due to high petroleum
prices and improved fiber quality, making them more appealing than
polypropylene fibers.

The Indian lighting fixture market generated close to $1.3 billion in 2011,
according to figures from CSIL. More than 15% of Indias production of
lighting fixtures is for export, reaching a total of $215 million in 2011 or
a 2% decline on 2009 figures. India has been becoming a bigger
manufacturer of industrial and outdoor lighting products, though much
lighting for the consumer market is imported.

Market Outlook
The global market for home furniture and decoration was negatively
impacted by the housing crisis as homeowners cut down drastically on
non-essential spending, postponed home improvement and decorating
projects, and delayed buying new homes. Due to recovery in the housing
sector and in the wider global economy, demand for home furniture and
decoration has begun to turn around. With employment figures improving
and levels of disposable income rising, property owners are more readily
investing
in
their
homes.

5.3 Key success factors for any organization operating within the
Industry and how is your organization performing on those criteria

The marketing mix starts with product strategy. Product covers more than
the physical goods the company wants to sell. It is the goods-and-service
combination the company offers to the target market. Thus, IKEA offers a
whole range of products, almost everything you need for your home. The

same category of products, for example, sofas, IKEA designs models with
different features. Some sofa models are even provided with different
covers to choose from. IKEA is positioned as selling at affordable price and
offering reasonable quality. In order to cut down the costs, IKEA does not
wrap its products fancily but with simple and environmental friendly
material. Here we see again the societal marketing concept takes into
effect. Concerning services, IKEA encourages its customers to do-ityourself (DIY) but it also provides technical help if needed.
Price is the amount of money charged for a product or service, or the
sum of all the values that customers give up in order to gain the benefits
of having or using a product or service. As shown in Figure, in terms of
pricing, changing list price is complemented by offering discounts or
allowances and altering the payment period or credit terms. Every now
and then, IKEA reduces the price of certain products because if they are
popular among customers then IKEA can make a bigger order, which
leaves the profit margin wider so suppliers can quote lower offers. The
company also offers various payment options and credit terms to choose
from for the customers. Hence, IKEA handles pricing quite well that its
pricing policy emphasizes customer values and integrates with the other
3Ps.
Place includes company activities that make the products available to
target customers. Related activities are listed in Figure, such as channels,
coverage, assortments, locations, inventory, transportation and logistics.
Over the years, IKEA has established an efficient network of delivering its
products from the suppliers to its customers. Several logistics hubs around
the world are now transporting the products to different countries and
territories. IKEAs flat packs play an important role in transportation to
keep the costs low. Locating the shops in the suburbs of cities also helps
to cut down the costs.
Like the marketing mix, promotion is a mix of tools as well. It is also
called marketing communication mix, consisting of the specific blend of
advertising, sales promotion, public relations, personal selling, and directmarketing tools that the company uses to persuasively communicate
customer value and build customer relationships. Ideally, the company
integrates the above tools to communicate well with its customers. Apart
from advertising on TV, newspaper and delivering brochures with the
latest offers to peoples home, IKEA pays a lot of attention to
environmental and ethical issues. IKEAs cooperation with NGOs such as
UNICEF and World Wide Fund for Nature (WWF) contributes a lot to
building a favourable corporation image and good public relations. In a
word, an effective marketing program blends all of the marketing mix
elements into a coordinated program designed to achieve the companys
marketing objectives by delivering value to consumers.

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http://www.b2binternational.com/publications/differentiation/
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