IKEA Invades America

Group 6 Group 7

Overview

IKEA = Ingvar Kamprad Elmtaryd Agunnaryd Founded in 1943 in south Sweden Motto - Affordable solutions for better living

Revenues of $28.8 billion 280 stores across 35 countries 1,20,000 + employees

Ikea Concept

Low cost substitutes for the ones available in the market Make furniture for the masses Low price with meaning Unassembled parts lead to low shipping costs

Product Strategy

Price Matrix used to determine products/segment Establish price before design Cost determines material used Different materials for one product to cut costs Matrix used to identify gaps in company lineup and identify market opportunities

Implementation strategy

Taking absolute advantage of different factors from different countries Factor Endowments of 50 countries were well tapped by IKEA They wanted to be a global company with standard product mix IKEA products were redesigned multiple times to maximize the number of products that could be squeezed onto a shipping pallet It put every element in its supply chain under a constant competition

IKEA Stores

15,000-35000 sq.mts. Upon entry shoppers coerced into predetermined path Customers free to lounge on model furniture Natural light to reduce costs Food courts located strategically Play area for kids

US Furniture Retailing

Market consisted of case goods, upholstered furniture, ready to assemble furniture and casual furniture Market highly fragmented Top 10 furniture retailers responsible for just 14.2 % market share Low end retailers aggressively promote on basis of price, environment reflects low price focus High end stores offer luxurious environments, various payment options, compete on quality and service

IKEA invades US

First store opened in Philadelphia in 1985 Products did not fit American homes The dimensions were in centimeters rather than inches Kitchenware were too small for American serving sizes Basically local responsiveness was missing in terms of culture and likings

Adaptations then..

Product specifications were modified accordingly Shopping experience was modified High profile ads to promote commitment-free approach to furniture - Unboring Doubled revenues from 1997 to 2001 Educating the customer was the aim

Contd..

In house restaurants which became15th largest food chain in America Pencils, paper, tape measure, store guides, catalogues, shopping carts, bags and strollers were available They did not change their old strategy of matrix method for developing new products

Future

Increase the number of stores to 50 till 2013 Finding a balance between Scandinavian and American taste of furniture

Inference

Domestic to International to a Global company Saturation in domestic market ie. Sweden paves a path to invade new markets Local responsiveness to some extent is very important for a company to be successful And finally to be a Transnational company