Table of ContentsSWOT AnalysisMarketing StrategyThe 4Ps of MarketingOrganizationRecommendationsWorks CitedIn 1943, IKEA was founded in Sweden by Ingvar Kamprad at the age of 17, the word IKEA was an acronym of his name with his first name and his name initials, the name of his family's farm which was Elmtaryd and the neighboring village named Agunnaryd (page 572). Kamprad predicted a rise in consumerism during the reconstruction boom that followed the war. So he moved quickly to provide low-cost furniture to families through the convenience of catalog sales (page 572). In 1947, IKEA published its first original mail-order catalog, in which the newly invented ballpoint pen was added to the assortment of products offered by Kamprad. Then, in 1950, Kamprad laid the foundation for IKEA's future direction by adding furniture and home furnishings to the mail order line. A year later, an expanded version of the IKEA catalog became available. In 1952, the stability of the furnishing items in the IKEA product line was strengthened when Kamprad presented his items at the St. Eric's Fair in Stockholm and won over customers with the high-quality, low-priced furniture from its range (“Welcome Inside Notre Société”). In 1953, IKEA opened the company's first showroom, demonstrating how Kamprad created a model of vertical integration, bringing together various suppliers under the IKEA umbrella, coordinating long-term production schedules and controlling distribution. In 1955, an IKEA employee discovered the company's "flat box" approach, which involved selling its furniture unassembled (page 572). In 1964, the introduction of the first warehouse store allowed IKEA to eliminate an entire step in product distribution by allowing customers to pick up containers from the warehouse (page 572). Practical solutions and a promise of low cost created a new formula for IKEA of furniture being “taken apart,” stored and shipped in flat boxes, and assembled by consumers armed with developed tools and visual instructions by IKEA. This formula allowed families to save money and create a new furniture experience. IKEA revolutionized the furniture industry. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Currently, IKEA is a limited liability company that is owned by an organization controlled by the Kamprad family. It has become one of the largest furniture retailers in the world by cooperating with more than 1,500 suppliers around the world, around 50 countries for designing their own furniture and marketing internationally, they own 341 stores in 38 countries, including: Germany, United States. United States, France, Italy, United Kingdom, Sweden, Spain, Canada, Russia, China and others. IKEA's business idea is "to offer a wide range of functional, well-designed home furnishing products at prices so low that as many people as possible will be able to afford them" ("Welcome to our company"). Their vision is “to create a better daily life for as many people as possible.” Our business idea supports this vision by offering a wide range of functional, well-designed home furnishing products at prices so low that as many people as possible will be able to afford them” (“Welcome to our business”). IKEA guides the company in every aspect of our business, from design idea and production, to stores, customers and beyond. They work hard as a team to offer quality products at affordable prices to our customers. This involves optimizing the wholeof the value chain, establish long-term relationships with suppliers, invest in new technologies, create efficient production techniques and produce large volumes. “Our vision goes beyond furnishing: we want to create a better everyday life for everyone involved. our business” (Annual Summary FY15, 2015). For 30 years, Mikael Ohlsson was president of the company which was replaced by Peter Agnefjall in 2013, he states that "one of the main reasons why I joined IKEA is that it is a a truly values-based company that wants to make a positive impact on people and communities. That's why sustainability is integral to everything we do. Sustainability should not be a luxury but should be affordable for as many people as possible” (“Peter Agnefjäll…”, 2013). IKEA sells good quality furniture, bathrooms, kitchens and accessories at low prices worldwide. IKEA states that “by quickly responding to our customers’ dreams and needs for a better life at home, we will continue to grow our business. We still have a lot to learn about our customers, which is why we constantly challenge ourselves to be even more relevant by creating affordable, high-quality home furniture and investing long-term in our business, our people and our planet” (Annual Summary FY15, 2015). IKEA's new store formats and services make it easier for customers to get to IKEA by public transport, pick up products near them or have them delivered so they are accessible to people whenever and wherever where they want. Because IKEA wants to have a positive impact on the planet, it wants to produce as much energy from renewable sources. It has therefore invested in wind farms and solar panels to produce energy that does not come from fossil fuels. Their entire lighting range is LED, which is good news for the planet and for customers' wallets, as LED bulbs use up to 85% less energy than traditional incandescent bulbs and last up to 'at 20 years old. All cotton used in products, from upholstery and bedding to towels and rugs, is now from more sustainable sources and they have reached our goal of sourcing 50% of their wood from more sustainable sources two years before the scheduled date. They are constantly offering more products and services that help customers save energy, water and waste at home (Annual Summary FY15, 2015). IKEA's strategy is to provide a wide range of furnishing items of good design, excellent quality and durability, at prices so low that the majority of people can afford to purchase these items. The innovation strategy consisted of designing furniture that was easy and inexpensive to build, receiving it disassembled in stores and displaying it in the showroom with detailed explanation labels, making the intervention of a specialist unnecessary. seller. This is one of the main reasons why customers tend to spend more time in the store than with a competitor. The company has made sure to stand out from the competition through the way it organizes its stores. For example, shopping at IKEA is an experience because they are designed for browsing. The furniture has been arranged and displayed in the stores as if in a home but employees are always available to answer questions. IKEA identifies its customers as half producers and half consumers because most products need to be self-assembled and they also have the option ofchoose, order, pick up and transport. Their operation faces a high production volume because their products can be substituted. The degree of customer contact is very low, that's why they focus on low costs, while their competitors will focus on higher costs due to low volume, high variety but no contact high customer. IKEA has released a shopping app for iOS to complement its current catalog. The splash screen displays a number of offers that will capture the attention of consumers using the app. It is very simple to use, users can simply tap items to view more details and search for other products by area, making navigation very simple. When they touch an item, they can see the availability of that item by location and it will tell you exactly where the item is in the store, by aisle. IKEA focuses on three goals when trying to measure its performance, namely quality, speed, reliability and flexibility. and the cost. The company wants to gain a quality advantage over the competition by doing whatever it takes to do it right. The products are made to fit the exact needs of their customers. The stores themselves are designed with a unique, clean layout that matches their brand identity. Customers perceive products and services with very high value. They also achieve speed by doing things quickly. Customers can quickly locate the store thanks to the bright yellow and blue identity. The store is designed with a warehouse and parking lots, which allow customers to park their cars without spending extra time looking for nearby parking. They also have complementary facilities such as daycare and self-service restaurants, which allow customers to also leave their children in the play area so that they can concentrate on their purchase. Products are packaged in flat packs with code numbers that help customers easily retrieve what they might need from the warehouse. IKEA also has a large ramp conveyor belt that transports items to the checkout, allowing customers to checkout as quickly as possible. The company also strives to get things done on time. An example would be the replenishment system that tracks out-of-stock goods and ensures they are kept to a minimum. IKEA does its best to speed up the arrival of new stock in case of stock shortages and rearrange quantities in case the beer trend changes. They also get a reasonable waiting time and guarantee constant availability of items. The way IKEA operates allows for flexibility in products and services as they have the ability to introduce new products and services. They are more responsive to customer wants and needs through the global sourcing strategy. The company leaves much of the design to its suppliers, which promotes the rapid introduction of new products. IKEA also allows mixed flexibility and is able to provide a wide range of products and services. The range of products is wide, from home furniture to office furniture and accessories, from childcare to self-service. The idea of ​​mix and match succeeds in providing mixing flexibility. The company is able to change its level of production. In stores, it is up to each store's management teams to determine the stock levels of each product, meaning they are more responsive to changing demand at that specific location.IKEA also has a specific cost target, which is to do things as cheaply as possible. High quality reduces costs and the time needed to redo things. Fast operations reduce inventory and improve customer flow, which helps increase sales. Having a reliable business increases predictability and efficiency. Additionally, the company's flexibility allows it to adapt to change and adjust its operations to meet customer needs and desires without additional costs. In this sector, the threat of new entrants is very high. There are virtually no barriers to entry but competition is very intense for new entrants. In order to compete effectively, competitors must invest large sums of money, develop long-term relationships with customers, and select appropriate locations for their outlets. It is very difficult to establish a presence in big cities and gain the reputation of IKEA, establishing a large supply chain and creating a unique brand. IKEA has successfully managed and maintained long and well-established relationships with its current suppliers. They reportedly have at least 1,300 suppliers in 54 countries and 21% of them are located in China. IKEA also has its own manufacturing company, called Swedwood Manufacturer, and is used to develop its own designs. Suppliers in this situation have very little bargaining power and may be forced to be on the same terms with IKEA rather than against them for whatever reason. Many direct competitors also import from China, which explains why consumers are faced with many alternatives and very significant negotiating power. IKEA needs to update its latest trends to avoid losing its reputation for style. They are able to keep up with any new style quite well and quickly thanks to their simplicity of design and innovative technology. The demand for basic furniture has remained relatively constant, making it very difficult to replace. The industry is very competitive, so IKEA has wisely tried to be competitive by entering the markets of China and Japan and allowing them to gain a competitive advantage (Perepu, 2008). IKEA faces many political factors such as the government's attitude towards the brand and policies. stability. In 2012, IKEA had to admit that the company used prison labor in East Germany in the 1970s and 1980s to make its products. Although they issued a formal public apology, the incident caused huge controversy. There have been allegations that the founder, Ingvar Kamprad, was an active member of Nazism, which caused controversy with negative effects on the brand's image. IKEA also received negative reviews for its doll called Lufsig, which means clumsy in Swedish. But translated into Cantonese dialect, it sounds a lot like an insulting term. In 2013, there was an incident in which a protester threw a Lufsig toy at Hong Kong's chief executive, which gave the toy a symbolic role among Cantonese dissatisfied with the Hong Kong government. The macroeconomic situation and the purchasing power of consumers are two main economic factors that affect the performance of IKEA and the performance of any business entity. The global economic and financial crisis that took place between 2007 and 2009 is a prime example of the impact of external economic factors affecting the business. IKEA had to cut around 5,000 jobs and sales volume fell 1% in the secondquarter 2009. The company is also directly affected by fluctuations in exchange rates between Europe and the United States and other major currencies due to the global scale of its business operations. . Other factors include interest rates, tax rates, unemployment levels and fluctuations in raw material costs. Some social factors have direct and indirect effects on IKEA. Growing societal concern over environmental issues threatens IKEA's long-term growth prospects as people become increasingly concerned about issues of deforestation, water depletion and global warming. The company is one of the world's largest consumers of wood, which could harm its brand image due to social changes related to concerns over environmental issues. Another issue would be the shift to online programs and applications to accomplish a wide range of personal and professional tasks. Fewer consumers might turn to electronic versions of books, which would then reduce demand for bookshelves. Other social factors that can strongly affect IKEA are demographic changes, changes in consumer attitudes and opinions towards furniture and appliances, media perception of the brand, and health and well-being. -be from the target customer segment. IKEA's competition is mainly local retailers, who try to copy the idea or counterfeit the products that IKEA can provide. In the United States, the company faces competition from Target, Ashley Furniture, Walmart, La-Z-Boy, JCPenney and Ethan Allen. In the United Kingdom, competition would come from Tesco, Next. In Sri Lanka, the main competitor would be Damro. Globally, Walmart would be considered the main competitor due to its style and functionality, although prices are lower at IKEA. Walmart is rated as less stylish than products sold at IKEA. Ethan Allen targets a more exclusive market than IKEA. IKEA has proven to be more effective than its competitors in providing high quality at a lower price (Jain, 2012). SWOTIKEA Analysis has many strengths as it is the largest furniture retailer in the world. IKEA being a global brand with a strong image is a major asset because everyone around the world is able to recognize it as a company. A very big strength that they have is that they are very sustainable with everything they do as a company and with the products and services they offer to customers. They are different from their competitors, which makes consumers want to buy their products even more. They offer a wide range of products that appeal to all target groups instead of targeting just one target group. This is also an exceptional asset, because not every company is able to appeal to the mass market. Since they are able to offer a variety of products to a variety of people, they are able to make many different products instead of having to limit themselves. A major weakness they face is not being easily accessible. IKEA stores are scattered across the United States in only certain states and when located in the state in which a consumer lives, the consumer must travel long distances to reach IKEA. Stores are not offered everywhere due to warehouse size and so it is easier for them to only have one location in a state. Another weakness is consumer perception between cost and quality. Consumers may not believe that the quality of the product they wish to purchase is worth the price theyoffer, or vice versa. If they think vice versa, then it is also bad for IKEA, because customers might think that if the price of the product is low, then maybe the quality is also low. A huge opportunity for IKEA lies in online sales, because now that consumers can buy products online and have it delivered to them, this will generate more sales for them instead of relying on sales from the stores themselves. As stores are not easily accessible, it is more convenient for customers to buy online and get delivered. The only problem is that the product does not look or appear to be the same as it was online. There is now a growing demand for lower priced products and for companies to be more environmentally conscious, which gives IKEA the opportunity to make even more sales as consumers today are sensitive to price and durability. Due to the economic downturn, footfall in IKEA stores has declined. Even though they offer low prices, the prices might still be too high for some consumers, especially in today's economy. Furniture may not be everyone's first priority right now, unless someone has purchased a new home. Even then, it was very expensive to buy a home or move, which could be another reason why store traffic declined. The biggest threat to IKEA is the barriers that prevent it from entering certain profitable markets because they do not adapt to the cultures, needs or wants of other countries. This makes it difficult for IKEA to gain sales globally if it adapts quickly.Marketing StrategyIKEA differentiates itself from its competitors through its cost leadership and shopping experience. In order to be a cost leader over its competitors, IKEA surveys its competitors to establish a benchmark and then sets its own price 30-50% lower than its competitors. The cost is so great that a price is first established, then the manufacturer, materials and design are chosen. They save consumers and themselves money in the long run. The shopping experience at IKEA is unlike any other company. The products they sell are displayed in room-like settings, so customers don't need a decorator to help them imagine how to put the pieces together. Guests would move along a predetermined path where they would be guided through a maze of rooms by arrows placed on the floor. Their on-site Swedish restaurant is as popular as its furnishings and allows consumers to use their products while eating out. In the restaurant, IKEA uses its own plates, bowls, utensils, cups, etc. They also offer a special drink that only they offer in store, made with lingonberries. IKEA focuses on several different factors when segmenting its market. The basic bases of market segmentation they use are income level, age, family life cycle, lifestyles and profit seeking. Because IKEA offers high-quality products at an affordable price, it wants to be able to appeal to all target markets. IKEA bases its store strategy on attracting young, low-income people. Students and young adults, who generally fall into the low-income category, are an important target market for IKEA, as these are the people who are looking to purchase furniture for the first time. Since it's their first time buying furniture, they don't want to spend too much money because they don't know what will happenin the future. Students and young adults are looking for quality, inexpensive furniture that will work for now. The other major demographic that IKEA focuses on is the family life cycle. New families need furniture to fill their new home, but don't have a lot of money to do it because they have already spent most of that money on the new home. IKEA products really cater to these types of young families, well beyond their product selection and cheap prices. IKEA stores are also very child-friendly, they have supervised play areas where parents can check their children in so they can shop in peace while the children play, clean changing rooms are provided and they offer a cafeteria where parents can bring children for a bite to eat after shopping. The restaurant also offers a special children's menu. The 4Ps of MarketingIKEA products focus on low price and high quality. Looking at their competitors' prices, “IKEA sets its own prices 30-50% lower than its competitors” (Sonwane, 2014). The product is what attracts customers. They want customers to see the high quality materials. Therefore, they place furniture surfaces where they are visible. Customers see screens where they can touch, feel and sit on the furniture to get a good look. IKEA uses flat-packed boxes to make shopping easier, “flat-packing boxes to make it easier for consumers to transport furniture home and reduce shipping costs” (Sonwane, 2014). They are able to transport these boxes in cars or trucks, saving money on shipping costs. IKEA promotes its products in all countries where they operate. They change the language of advertisements so that consumers can understand them. They use different IMC (integrated marketing communication) tools including public relations, direct marketing, advertising, sales promotion and digital marketing. In the area of ​​public relations, they offer events in certain stores such as buffets offered to families during the holidays and they also call on the press. As part of direct marketing, they offer online and printed catalogs every year. The catalogs are produced in different editions and languages ​​and are printed on completely chlorine-free paper and contain at least 10-15% post-consumer waste. As part of advertising, they create print advertisements that run online and in stores, they also create video advertisements used for the Internet and television. As part of sales promotion, they offer discounts and coupons that can be used in-store and online. In digital advertising, they use Facebook, Youtube, Twitter, Pinterest, Google+, Instagram and have an app that consumers can download and purchase. IKEA distributes products nationally and internationally through digital and in-store distribution. Mattel has a presence around the world, including North America, South America, Europe, Russia, Australia and Asia. At IKEA, distribution is all about making the journey from manufacturer to customer as short as possible. They distribute their products in large volumes and in flat packs, saving money for them and consumers. In 2015, 328 IKEA Group stores are located in 28 countries and there are 978 suppliers in 50 countries (FY15 annual summary,2015).OrganizationThe company's management strategy can be described as a flat box, "the organizational structure resembles the IKEA flat box, with only four layers separating the CEO and the cashier on the sales floor" (Griffin, 2016) . A flat organizational structure can also be described as a horizontal structure, “flatter structures are flexible and better able to adapt to changes” (Griffin, 2016). “Flat structures have fewer levels of management, with each level controlling a large area or group” (Griffin, 2016). IKEA separates its team based on those who have similar knowledge and expertise to a particular skill. Figure 1 shows the four levels of IKEA. The advantages of this management style are communication and coordination. Superiors are able to help and make decisions. A disadvantage of the flat box is workload: “faster communication allows for faster decisions, but managers may end up with a heavier workload” (Griffin, 2016). Their supply chain starts by building with their suppliers. IKEA is able to negotiate prices with its suppliers like no other company. Since they are able to make deals that will have a positive impact on the business, it becomes a long-term business relationship. A long-term business relationship comes with long-term contracts. “Having the customer select the furniture and pick up the packages themselves is an inventory management tactic called 'cost per touch'” (“What is Logistics?”). Sourcing materials close to the supply chain reduces transportation costs. By directly delivering the supplier's products to IKEA stores, the company is able to reduce prices for both them and consumers because it reduces handling costs, reduces miles traveled and reduces the carbon footprint they create. They also save money by attaching the warehouse to the retail stores. By doing this, they reduce one step in the supply chain process because consumers can pick up the product from the warehouse themselves. Looking further into the materials used by IKEA, their resources are also saved through hollow furniture: “IKEA saves resources. using hollow-legged furniture” (Roy, 2015). Their supply chain strategy aims to promote their sustainability: “by using high-strength steel in its products, IKEA realized it could improve the ergonomic and safety aspects of its design, while reducing weight products, reducing costs and protecting the environment. » (Roy, 2015). Managers at IKEA have inventory responsibilities. It starts with the ordering process and logistics. “Logistics is defined as a business planning framework for managing the flow of materials, services, information and capital” (Lu, 2016). Once all stocks are checked, delivery notices are also sorted. According to Logistics World, IKEA's supply chain includes raw materials, manufacturing, distribution, retailer and consumer. Inventory goes from the supplier to the manufacturer, then to the distribution center and retail outlets, and customers can pick up the product at both locations. IKEA has had difficulty adapting to the cultures of other countries. They tried to implement the same business model that they used when expanding into China and the United States. They realized they had made a mistake due to the diversity of consumers across the world. For example, the.