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Date: 11/01/2015
Executive Summary
IKEA is a global brand and a very well established company. IKEA is one of the
largest furnishing retail chains and was founded in Sweden in 1943. The mission
of IKEA is to offer a wide variety of home furnishings of good design and
function at prices so low that the majority of people can afford to buy them and
the vision is to create a better everyday life for many people (Raju, 2004).
IKEAs main driving force is to provide customers with trendy functional products
with minimalist lines which are manufactured co efficiently with suppliers (Hill &
Jones, 2005). IKEA targets working class, there are 351 IKEA stores spread over
43 countries.
IKEA decided to expand its company and going abroad is a necessity, as the
worlds largest furniture retailer, IKEA is very popular for its ready to assemble
furniture and its architectural designs on furniture (Oliver, 2013).
Table of Contents
Introduction.............................................................................................................
..........4
MICRO and MACRO factors
PESTLE
Analysis....................................................................................................4
SWOT
Analysis.....................................................................................................5
Porters 5
forces..................................................................................................6
Strategies.............................................................................................................8
Value chain model of
IKEA..................................................................................8
The Marketing
objectives.................................................................................................9
Business
Strategy............................................................................................................10
Corporate
strategy..........................................................................................................11
Business
Model...............................................................................................................12
The Marketing
tactics.....................................................................................................13
Recommendations...................................................................................................
......14
Conclusion...............................................................................................................
.......14
References...............................................................................................................
......15
Introduction
IKEA is a Sweden based company internationally well known furniture brand; it was founded
in 1943 and has grown rapidly since then. Today it is well known for its Scandinavian designs
and is believed to be worlds largest furniture retailer. IKEA is very well known in the market
for its amazing flat pack furniture, ready to assemble by the customers at home. This has
allowed IKEA in reducing their price and has managed to survive at a low cost. IKEA carries
a variety of products which includes home furniture, office furniture, accessories etc. All the
range are all year available in the stores as well as available online. Low pricing is the
strategy for IKEA and has a vision to create a better everyday life for many people across the
world (IKEA, 2012)
PESTLE Analysis
Social Social culture environment includes the beliefs, lifestyle of the people, their
behaviour, taste etc. Consumer preference, condition and the purchasing pattern under which
the products can be sold are directly affected by social cultural changes (Scherrer et. al.,
2003)
Chinese tend to spend most on their living rooms, most of the living rooms contain dining
table as Chinese kitchens are build small therefore Chinese spend less on Kitchen furniture.
Hence IKEA provides more on living room furniture.
IKEA offers flat pack furniture where customer assembles themselves. The DIY products are
appreciated in West of China as customers know they save money by assembling the
and
Porters 5 forces
Porters 5 forces is a generic framework that deconstructs industry structure into five
competitive forces (Nemati and Barko, 2004, p29)
Buyer Power: IKEA is currently performing well in the Chinese market; according to the
CEO of IKEA group China is going to be the second largest market place for IKEA in the
world (Oliver & Philip, 2013). Chinese customers always expect high quality but also with
low price. When IKEA entered first into Chinese market even though the price was less
compared to other countries still IKEA had to reduce its price as Chinese couldnt afford to
buy. Therefore there was a chain reaction in value chain which forced IKEA to reduce costs.
Thus the uniqueness has made IKEA to beat its rivals (Tian, 2007).
Supplier Power: IKEA suppliers and good relationships with them is the greatest asset.
IKEA has suppliers in more than 50 countries however 21% of them are established in China
6
Distribution Channel
10
(Porter, 1998)
and
look
differentiation
for
competitive
advantage while the cost focus will aim its advantage over cost.
Cost leadership is clearly talks about costs that IKEA should focus on their expenses and
should try to reduce their cost by applying different tactics. For IKEA it would be better if
they get wood from local traders of a good quality so that it wont affect its brand image
similarly that will help IKEA to reduce its cost of getting wood from Sweden or from other
country. Into the Chinese market IKEA has to be unique and should be appreciated by the
customers, differentiation is based on the products IKEA is offering and how they differ from
local traders (Porter, 1998).
There will be various strategies which will be followed by the company in order to run their
business and to achieve sales target. The senior executive of the company will be the one who
will be responsible for the strategies to plan. IKEA will be using Ansoff Matrix to help in
deciding the choice of corporate strategy.
11
If we see Ansoff Matrix chart above its simple to classify that the business fall under
diversification and its means new product in new market. Even though in China there are
many other businesses which imitates the designs very easily but also IKEA gives tough fight
by selling at low price without any compromise with the quality. Thus IKEA has to carry out
risk assessment to outline the threats and opportunities in the new market.
Business Model
IKEA has studied both macro and micro conditions of Chinese market. According to
Hofstedes cultural dimensions China has a culture of high power distance and long term
orientation (Hofstede, 2001). IKEA has framed certain objectives and has planned a business
model. IKEA has combined a strategy of low price and to provide better delivery and
assembling service to its customers in China. IKEAs current business model is its flat pack
furniture. According to The Telegraph (2014), IKEA proves flat pack furniture works around
the world; Sales went up by 5.9% in China. IKEA is believed to be the one of the most
reliable stores for the consumers as it has 300 stores in 26 countries, considering strongest
growth was in China. IKEA has also achieved its brand recognition due to its value delivered.
IKEAs focus is on flat pack furniture and to deliver with a good quality and affordable price.
There are 3 major advantages that why IKEA has targeted to expand their business with flat
pack furniture and they are Cost, Selection and Easier to transport. One of the main reasons
for IKEA to target flat pack furniture is its cheap and also the factory which was providing
wood is in Nantong (Fangfang, 2013). It also gives you a wide choice for selection which
means not necessary to buy a matching set of furniture and very important is easy for
12
13
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