Wan Marini IzayuMimi MeraniMaizulNorhidayahYazidMimi Haidazatul Zuhanaria

Company Background

Ingvar Kamprad Elymtaryd Agunnaryd

He started his business by selling matches and variety of goods.

So when Ingvar started his furniture business in the late 1940s, he applied the lessons he learned to the home furnishings market.

Continued…

IKEA was officially incorporated in 1943 to serve price-conscious neighbours in the province of Smaland in southern Sweden.

Its large retail store in the blue-and-yellow colors of Swedish flag are located on the outskirts of major cities, attracting shoppers who are looking for modern designs at good value.

Continued…

• Ingvar's innovative idea was to offer home furnishing products of good function and design at prices much lower than competitors by using simple cost-cutting solutions that did not affect the quality of products.

• Ingvar used every opportunity to reduce costs, and he scraped and saved in every way possible - except on ideas and quality. This is how the IKEA Concept began

Issues??

IKEA, the Swedish furniture store chain virtually unknown outside of Scandinavia more than 25 years ago, has drawn large opening crowds to its stores as it has pushed into Europe, Asia and North America.

Currently, IKEA has 316 stores in 38 countries including the one in Mutiara Damansara, Petaling Jaya, Malaysia.

Issues??

But the expansion was not always smooth and easy. Despite some cultural issues pending the expansion strategy during its expansion especially in the United States of America as discussed in this case study, IKEA was able to solve all these issues and proceed with the expansion successfully.

Future Planning

Although the firm remains private, it continues to innovate and reorganize itself. In 1992, IKEA abolished internal budgets and now each region must merely keep below a fixed ratio of costs to turnover to maintain its financial position and to continue with expansion.

Discussion area

In the following section, we shall discuss:-1. IKEA’s firm-specific advantage 2. Country-specific advantage 3. Cultural factors issue 4. IKEA’s promotion and distribution strategy 5. Issues relating to the expansion in the

USA

What are IKEA’s firm-specific advantages? Country-specific advantages?

QUESTION 1

Definition of Specific Advantage

Described as :

criteria or credibility of the companies that can assist or guide them in positioning

their product/brand in the market

1) Store Design and Layout ready to assemble product were conveniently

placed on racks Larger inventory in store

2) Supplier Network and Standardized Product Line

mass produced – gain economies of scale high standard of quality furniture but at a very

minimum price Can overcome insufficient stock and cut cost on

importing/shipping the product from Sweden

Specific Advantage

3) Marketing Strategy unique store lay out, word of mouth and free

catalogs Free catalogs- helps the potential customers

visualize the complete room

4) Legacy of Quality Example Volvo In US, IKEA will sent people to suppliers factory

and provide technical tips about efficient methods and to shop for better quality but at low price.

Specific Advantage

5) Simple Management Structure only have four levels (from chief executives to

check out counter). decision can be made in a short period and in a

faster way

6) Location in Europe[Sweden] easy to penetrate the Europe market since

have similar root culture sent employees who knows the local language

to set up stores

Specific Advantage

7) Suits to Customers Demographic Southern California- young and active Modern design and assemble-it-yourself was

widely accepted by them

8) Political Stability The countries selected by IKEA had a stable

political environment eg : USA, Switzerland, Denmark and Canada.

Specific Advantage

What are the cultural factors which make expansion abroad in retailing difficult? What has made it

possible in IKEA's case?

QUESTION 2

Definition of Culture

"The integrated sum total of learned behavioral traits those are manifest and shared by members of society“

Elements of Culture: • Preferences and tastes. • Management style • Educations • Laws and Politics • Religion and language • Social organization, technology and material

culture

IKEA’s expansion: Specific Cultural Reasons

Different management style IKEA’s employees were assigned greater

responsibilities and more freedom than usual in many traditional retail stores.

In Canada, individuals often asked for more direction and specific guidance.

IKEA’s expansion: Specific Cultural Reasons…Continued

Different consumer decision process The universal slogan and the moose symbol were not

as valuable in the US as in Canada and Germany. Different tastes. [Bed] American people are more interested in aesthetic and

shopping style. American also were not much happy with the “cash

and carry” service In America more media advertisements were needed.

IKEA Strategies

Product adaptation to be closer to the customer’s desire: for example reconfiguration of the size of the bedroom for the US market.

Promotion adaptation: différent slogans, différent images.

Store layout was altered to conform more with American aesthetics and shopping styles.

A more generous return policy.Next day delivery services.

Describe how IKEA'S expansion has re-energized mature markets around the world and changed the

competitive situation.

QUESTION 3

Winning formula that could offer quality furniture and very low price

Broken several rules of international of retailingIKEA layout was like a warehouseSmall furniture retailers have disappeared• Changed the consumer behavior• Consumers have more fun shopping furniture• IKEA is the only company that offer product to

different type of people and lifestyles• IKEA innovates all the time

How does the TV advertising campaign initiated by IKEA overcome the entry barrier of high advertising

expenditures?

QUESTION 4

INTRODUCTION

Advertising is the process of persuading potential customers to buy products or promote its services.

Advertisements may appear in many forms, including newspaper and magazine ads, radio and television commercials, direct mail campaigns, and various other forms.

With the emergence of brand recognition as a key factor in marketing and advertising, companies have entered into multi-billion dollar contracts with advertising firms to promote their products and services.

An advertisement plays a vital role in the marketing of products as it provides a buying power for various product operations by affecting the behavior of consumers.

Television however occupies an important place of products due to its extensive spread worldwide.

In addition, television plays an important role on changing the consumer behavior and also provides new patterns for consuming products and services.

The common uses of television offer effective and realistic ways for the marketing of products and services.

Many factors may affect the television advertising operation such as the time of advertisement and the way by which the television ad is shown

TV advertising differentiates over other media. It allows producers to make promotion farther product and make them known for a lot of consumers through voice and picture.

But we must notice that TV advertising is more effective but more costly when compared with other multi – media.

Therefore, it's an important issue to choose the proper time and show of television advertisement.

IKEA’s TV Advertising

With Deutsch – an advertising agency based in New York, IKEA had planned to develop a series of eight TV advertising spots that featured people at different transitional stages in their lives, when they were most likely to be in the market for furniture.

Examples of the advertising spots are: One spot featured a young family who had just bought

a new house, another couple whose children had just left home, and so on.

IKEA even developed one spot that featured a homosexual couples, two men talking about furnishing their home. It was a daring step applauded by most advertising experts and impartial observers. The campaign had a positive impact on IKEA’s image and on IKEA’s sales.

Spot showed a divorced woman buying furniture for the first time on her own.

Should IKEA expand further in the United States or focus on other countries?

QUESTION 5

As the biggest Home Furnishings Retailer which has a large number of chain stores all over the world, IKEA should take the market of the United States and that of other countries as equal.

But WHY?

OPTION 1

As we know, the IKEA Concept is based on creating well-designed and functional home products for people at prices so low that as many people as possible will be able to afford.

What’s the advantage on IKEA itself?

Though, generally speaking, most of the Americans are now living in a higher life label than the world’s average standard , there are still people who are not able to afford quality furniture. So the promotion in America market should keep running ,moreover, more competitive and efficient promotion strategies are required.

IKEA succeeded finally to adapt its activity in U.S.:

Product adaption like the dimension of its bedroom, more quality with U.S. suppliers through random

checks, New cash registers to decrease customers queue, New store layout New service like next-day delivery

Price Cut importing cost because of recruitment of U.S.

suppliers,

Promotion Advertising necessary (more than in other markets) Strong slogan : :It’s big country. Someone’s got to

furnish it”, TV advertising attracting different kinds of consumers

Place/Distribution Huge size of the stores : 200,000 square feet Large inventory and parking space

What are other reasons? Advantages of the expansion in the U.S?The company

Objective is to be s global leader of furniture Standardized retailer Need to be always flexible Expensive to import furniture from Europe (shipment) Threat to lose its concept, and competitive advantage,

with too much adaption IKEA has already lost a lot of money in U.S.

The market Huge markets, huge demand Household furniture market is one of the important

worldwide High purchasing power Many competitors, especially U.S. firms that dominate

the market, being more competitive U.S. tastes differ from European Environment – Political and economic environments are

stable. Huge countries, with big differences between

consumers.

OPTION 2

IKEA SHOULD FOCUS ON OTHER COUNTRIES

In other countries , IKEA furniture is easier to be strongly competitive, for there is more possibly to be less risk and competitors who are handling quality house furnishings, and , more people who can only afford house furniture at a relevant lower price. This is a good opportunity which IKEA has been long for.

IKEA is a global company ,its target market should not be limited in a area.

Thank You !