Ikea

Live your life. Love your home.

Presented by: Fenella Andrade Mallesh Goudar Nipun Jain Sarah Choudhary

Masters in European Studies and Management (MESM) 2010-2012Manipal Centre for European StudiesManipal University, Karnataka, India

IKEA History

• In 1943, IKEA was founded by Ingvar Kamprad• Based in Sweden• World's largest furniture retailer• World’s leading home furnishings retailer • IKEA numbers 1,04,000 employees in 267

stores in 45 countries

SWOT Analysison

IKEA Home Furnishings

STRENGTHS

Brand Image IKEA ranked 41st among the best global brands

around the world in 2006 with a brand value of $8,763

strong internationally known brand attracting key demographic customer groups

strong brands enhance customer loyalty and lead to repeat purchases

Cost Efficient

Low price no compromise in quality

Unique business model

own industrial group, Swedwood, which produces wood-based furniture and wooden components

its operations cover every step of production, from forestry, saw milling and board manufacture to furniture

efficient productions which enable it to maximize productivity and minimize waste-generation

own design group which can makes sure that their products matches the trend of the industry

Good relationship with suppliersMaintained long-term partnerships with its suppliersEnsures that the company has access to high-quality materials at

reasonable prices

Marketing expertise Market positioning statement is “Your partner in better living.

We do our part, you do yours. Together we save money.”Market on its strengths – based on offering a wide range of well

designed, functional products at low prices Catalogue- 175 million copies sold in 55 editions and 27

languages (2007)Other promotions include their seasonal sales, internet deals and

television advertisements

Flat packing that helps in management

Flat packaging, which reduces shipping costs, minimizes transport damage, increases store inventory capacity, and makes it easier for customers to take the furniture home themselves, rather than needing delivery.

But the original reason for it was competitive pressure from IKEA's competitors to their suppliers, who actually

boycotted IKEA, forcing IKEA to do it themselves. Easy to assemble One stop shopping Friendly atmosphere and store layout One stop shopping

Customer Service• Restaurant in store

IKEA exit bistroSwede ShopIKEA Restaurant

• Child CareSupervised PlayroomBaby Care RoomFood Warming FacilitiesChildren’s Meals

• Design AdviceOffice PlanningKitchen PlanningHome Furnishing Advice

• Store AtmosphereEasily Located ProductsBrowse through showrooms and try out productsDelivery Services available or take home products immediately

WEAKNESS

IKEA has to acknowledge its weaknesses in order to improve and manage them. This can play a key role in helping it to set objectives and develop new strategiesNot enough distribution channels. For eg: There are only three retail

shops in Hong KongProblem of product recall due to faulty base. For eg: IKEA had

recalled Parodi and Apelsin glass casesIKEA is a global company, so product standards are difficult to

maintain.Some countries where IKEA products are made do not implement the legislation to control working conditions

Swedish designs not appealing to American customersLimited Furniture Designs - IKEA had limited furniture designs which

could obviously not cater to a wide range of customer needs and preferences

OPPORTUNITIESIKEA are moving from International to global status

through the development of Asia and Eastern European models

Targets all levels of the market, upper, middle and lower classes

Sourcing from China is one opportunity. Sourcing from low cost countries like China would reduce its costs and enable IKEA to concentrate on increasing its market share

Bright prospect of online sales

THREATSIf a company is aware of possible external threats, it can plan to counteract them. By generating new ideas, IKEA can use a particular strength to defend against threats in the market.

With economic concerns over rising living costs and depleting disposable income there is an overall threat to the performance of the business in UK and American markets specifically

The regulatory environments across the globe vary and can affect how IKEA does business and its product costs, especially the use of natural resources

PORTER’s 5 FORCE ANALYSIS

Threat of Buyers growing bargaining power

– There is a little power because of the existing low-price options

– IKEA ensure that their customers in all aspects will be satisfied for quality service they provide

– Focused their marketing approach on demands and needs of the buyer

– IKEA uses their corporate responsibility as a good public image to their customers

– IKEA Family -card as a membership

Threat of Suppliers growing bargaining power

IKEA has its thousands of suppliers that set standards in delivering the materials

– Because of the low-pricing, IKEA’s profit margin also affects the prices in raw materials than by prices in labour

– IKEA has a wide network of 1300 suppliers. They carefully select the manufacturer of its products. The company has own production factories and designers which makes it less dependent on others

– Bargaining power of supplier could be threat for the profit of the company

Threat of Substitute Products

–There is no specific product that can be a substitute for the furniture but IKEA at least, have to keep up with the latest trends, to avoid becoming out of style–Problems faced due to distribution channels

Threat of Intense Segment Rivalry

– The IKEA’s furniture competitors’ offers different styles and functionality• Conrin targets a new low cost in terms of furniture line; Crate

& Barrel offers a furniture in a box which is subject in higher prices

• Ethan Allen aimed at a more upscale market• Wal-Mart is equipped in a big box furniture that is categorized

under the general store must-have-items, but don’t have much of a style

– IKEA is the most successful in delivering the complete package for the customers that reflects on weak rivalries

– There will always be substitutes for furniture’s but IKEA competes with price and there isn't competitors in same price range

Threat of New Entrants

– IKEA stores do not reach many small towns and this is an opportunity for the new competitors to move into small and midsize cities with smaller stores and less selection. But not easier in city because new entrants have to establish a vast supply chain and create a unique brand name

– The furniture market is already highly competitive - the risk of new entrants is not extremely high - huge capital needed to start the business

5 c Analysis

• Company• Collaborators• Customers• Competitors• Climate/Context

COMPANY

• Product Line– Kitchen ware– Dinning – Living room– Bedroom– Hallway– Bathroom & Laundry– Small storage– Cooking

• Market Image

– Awards won by the company

• Leo Burnett Hong Kong win the Grand Kam Fan for IKEA at the Hong Kong 4As Awards

• IKEA (Campaign of the Year)• IKEA (Corporate Branding Campaign of the Year• IKEA (Best Use of Online Media)• IKEA Honoured With Eurobest 2010 Advertiser Of The Year

Award• Award by Queensland Government’s Environmental Protection

Agency for IKEA’s Environmental initiatives (2007)• IKEA was named one of the 100 Best Companies for Working

Mothers in 2004 and 2005 by Working Mothers magazine • ranked 96 in Fortune's 100 Best Companies to Work For in 2006

and in October 2008 • IKEA Canada LP was named one of "

Canada's Top 100 Employers" by Mediacorp Canada Inc

• Culture

–Diversity and creativity– Family like Quality–Cost Conscious–Openness– Equality–Competitiveness– Eco Friendly– Social Initiative

(main partners to IKEA Social Initiative are UNICEF and Save the Children)

• Goals of the Company

– Implementing strategies in the organization–Customer transportation and carbon

footprint–Working with suppliers on compliance–Communicating sustainability

accomplishments– Integrating sustainability into core business–Forestation and use of wood

COLLABORATORS

• Distributors

– They have 28 distribution centres in 16 countries that supply to IKEA stores.

– They have over 300000 distributors all around the world

• Suppliers

– They possess the bargaining power– IKEA prefers procuring their materials from low

cost countries like China to reduce their overall cost

• Alliances

– Rainforest Alliance

The IKEA Group supports the Rainforest Alliance to promote Forest Stewardship Council (FSC) forest management certification in China by educating foresters and stakeholders on the principles of FSC certification. The project provides key experts with the training, tools and materials to conduct Rainforest Alliance workshops in order to increase the level of sustainable forestry awareness in China.

CUSTOMERS• Market size

– First stores were opened in Norway and Denmark– Germany - IKEA's biggest market ( 45 stores)– United States (37 stores)– France ( 28 stores)– Presently IKEA has 316 stores in 45 countries

• Top 5 sales countries Germany 19 %USA 11 %United Kingdom 11 %France 9 %Sweden 8 %

• Benefits and Cost

–Gain from good quality at low cost–Stylish and varied designs–Friendly atmosphere–One stop shopping

COMPETITORS

• Products– All home solutions– Kitchens, bathrooms, sofas, chairs, beds and

textiles, rugs, floors, lamps, plants, and everything in between

– Displayed to show design possibilities with IKEA products

– Assembled by the customer

• Intratype Competition– Crate and Barrel– Pier 1– Pottery Barn– Furniture retailers

utilizing similar store layouts • M.Jacobs• Ashley’s Home

Furnishings• Ethan Allen

• Intertype Competition– Home Improvement

Stores• Home Depot• Jerry’s

– Department Store’s• Meier & Frank• Macy’s

– Discount Retailers• Wal-Mart• Fred Meyers

• Market share

– Despite the challenging economic situation in the world, fiscal year 2009 was a good year for the IKEA Group. The Group opened 15 new IKEA stores and entered its 25th market, with the new IKEA store in Dublin, Ireland. Sales increased to 21.5 billion Euro, which is an increase of 1.4 per cent compared to last year.

– The IKEA Group operates 267 IKEA stores in 25 countries. In addition there are 34 IKEA stores, that are owned and run by franchisees outside the IKEA Group, in 16 countries/territories

– “It has been a challenging year in which we have had to adapt to changed market conditions,” says Kerri Molinaro, President, IKEA Canada. “We know that many of our customers have less money to spend and our low price concept is therefore more relevant than ever. Our customers have recognized that in tough times IKEA has the better home furnishing offer.”

Presented By :Fenella Andrade Mallesh GowdarNipun JainSarah Choudhary

Live your life, love your home.