Ikea

IKEA: Managing Cultural Diversity Group Members: Archana kumari

Soumya Shilpa Pawan Lawi Anupam

Sonal Sharma

GITAM INSTITUTE OF INTERNATIONAL BUSINESSVISAKHAPATNAM

INTRODUCTIONINTRODUCTION

Founded by Ingvar Kamprad in 1943Founded by Ingvar Kamprad in 1943

IKEA owned by IKEA Group includes IKEA of Sweden, Swedwood, the sales companies IKEA owned by IKEA Group includes IKEA of Sweden, Swedwood, the sales companies that operate IKEA stores, and all purchasing and supply chain functionsthat operate IKEA stores, and all purchasing and supply chain functions

IKEA Group owned by INGKA Holding BV, which is itself owned by the Stichting IKEA Group owned by INGKA Holding BV, which is itself owned by the Stichting INGKA FOUNDATION of the NetherlandsINGKA FOUNDATION of the Netherlands

Ranked 96 in Fortune's 100 Best Companies to Work For in 2006 and in October 2008Ranked 96 in Fortune's 100 Best Companies to Work For in 2006 and in October 2008

International home products retailer that sells flat pack furniture, accessories, and bathroom International home products retailer that sells flat pack furniture, accessories, and bathroom and kitchen items in their retail stores around the world.and kitchen items in their retail stores around the world.

IKEA Business Idea is to offer a wide range of well designed, functional products at prices IKEA Business Idea is to offer a wide range of well designed, functional products at prices so low that as many people as possible will be able to afford themso low that as many people as possible will be able to afford them

Its vision - To create a better everyday life for the many peopleIts vision - To create a better everyday life for the many people

The IKEA WayThe IKEA Way• Low costs• Long production lines• Self-assembly at home• Self-transport• Convenient boxes• Catalogues• Remaining Swedish (design, management)• Modern ideals (durable, easy to live with,

natural and free style, color, joy)

More than 226 IKEA stores in 33 countries with 200 stores belonging to IKEA More than 226 IKEA stores in 33 countries with 200 stores belonging to IKEA GroupGroup

Rest are owned and operated by franchiseesRest are owned and operated by franchisees Currently 28 U.S. stores plans to open 50 more stores by 2010Currently 28 U.S. stores plans to open 50 more stores by 2010

World Map showing locations of IKEA stores in 2007. Green represents countries with stores in operation and blue shows proposed locations.

Sales for the IKEA Group for the financial Sales for the IKEA Group for the financial year 2008 were up by 7 per cent to a total of year 2008 were up by 7 per cent to a total of

21.1 billion euros21.1 billion euros

Top five sales countries

Germany 15%, USA 10%, France 9%, UK 7% and Sweden 6%.

2006 Sales, by Region

Top five supplier countriesChina 21%, Poland 17%, Italy 8%, Sweden 6% and Germany 6%.

Works with more than 1600 suppliers in more than 55 countries

2006 Supplier, by Region

IKEA Modified Value IKEA Modified Value ChainChain

Michael Porter argues that an organization can enhance its competitive positioning by performing key internal activities in the value chain at a lower cost and better than its competitors.

The value chain approach identifies two major activities- primary and secondary. Primary actives include production, marketing, logistics and after-sale functions. Secondary activities, on the other hand, are identified as support processes to primary activities.

MARKETINGMARKETING

4 focal areas4 focal areas

Product design Product design

Catalogs Catalogs

Advertising Advertising

Public relations/sales promotionsPublic relations/sales promotions

CATALOGS AND CATALOGS AND ADVERTISINGADVERTISING

Company spends 70% of its annual marketing budget to print catalogsCompany spends 70% of its annual marketing budget to print catalogs

Catalogs produced in 38 different editions in 17 languages for 28 different Catalogs produced in 38 different editions in 17 languages for 28 different countries in 2006 and countries in 2006 and in 55 editions, in 27 languages for 36 countriesin 55 editions, in 27 languages for 36 countries in 2009in 2009

Also uses T.V., radio, internet and phonesAlso uses T.V., radio, internet and phones

Mainly rely on word-of-mouthMainly rely on word-of-mouth

Use promotional stunts and gamesUse promotional stunts and games

PRODUCT DESIGNPRODUCT DESIGN

Clean lineClean line Frugal stylingFrugal styling Cachet and inexpensiveCachet and inexpensive Innovation in designsInnovation in designs

A completed IKEA flat pack bookshelf

INNOVATIVE INNOVATIVE EXAMPLESEXAMPLES PRODUCT LINE:PRODUCT LINE:

eNook The Mobiletech Mobile Desk

Wall Desk

Elegant designCan hold 45 lbsSpace efficient Highly functional

Can fit in most rooms and offices

MobileScratch & stain

resist

Weighs only 30.5 lbs.Strong Lift top compartment

INNOVATIVE EXAMPLES

Counselor's desk Drop Lid Desk

Elegant design Foldable topTwo pigeon holesTwo secret pencil drawers

Highly functionalHigh qualityWork surface drop lid

INNOVATIVE EXAMPLESINNOVATIVE EXAMPLES

a reading chair is an actual chair with cushions that turn, like the pages in a book:

a reading chair is an actual chair with cushions that turn, like the pages in a book:

This room divider was meant to look like a stand of trees at the edge of a forest:

This room divider was meant to look like a stand of trees at the edge of a forest:


image of a dandelion--in fact the shadows it throws were meant to look like dandelion petals scattered in the wind

image of a dandelion--in fact the shadows it throws were meant to look like dandelion petals scattered in the wind

A new invention entirely, comprised of bamboo sheets glued together. The bowl keeps its shape, but it's slightly floppy as well--somewhere

between wood and fabric

A new invention entirely, comprised of bamboo sheets glued together. The bowl keeps its shape, but it's slightly floppy as well--somewhere

between wood and fabric


enormous bowl--20 inches wide--resembles a huge hat misplaced by some giant

enormous bowl--20 inches wide--resembles a huge hat misplaced by some giant

Inspired by a park bench, this chair actually uses cutting-edge fabrics and fabrication. The top is soft and cushy, though it looks

like painted wood

Inspired by a park bench, this chair actually uses cutting-edge fabrics and fabrication. The top is soft and cushy, though it looks

like painted wood


This rug draws from those designed by North African nomads, who weave rugs to different lengths each season, to mark how plentiful a passing

harvest has been

This rug draws from those designed by North African nomads, who weave rugs to different lengths each season, to mark how plentiful a passing

harvest has been

A 15-inch-tall pepper mill that was meant to look like a king's scepter

A 15-inch-tall pepper mill that was meant to look like a king's scepter

IKea’s growth and popularity

Major reasons for IKEA’s growth and popularity are :

Democratic Design

• Offers a wide range of home furnishings of good design and functionality• Low cost, modular , ready –to-assemble furniture

Overall low cost leadership in the industry

Modified value chain

Convenient shopping

STRATEGY TO SUSTAIN GROWTH

Focus on customer service

• Add more services to enhance customer ‘s experience ( eg .home delivery)•Implement a Customer Relationship Management system to track current customers and communicate with them.

Focus on correct placement of stores

• Concentrate stores in metropolitan areas , where apartments are smaller • Concentrate stores in college areas • Continue clever advertising to create demand.

Clever advertising and promotion• Your furniture says something about you. And like fashion , your style changes.

PUBLIC RELATIONS / SALES PUBLIC RELATIONS / SALES PROMOTIONSPROMOTIONS

Works to build customer relationships and maintain employee moraleWorks to build customer relationships and maintain employee morale

It provides its customers with pencils, paper, tape measures, store guides, catalogs, strollers It provides its customers with pencils, paper, tape measures, store guides, catalogs, strollers and shopping bagsand shopping bags

Offer delivery for bulky items and rents carracks for convenience to customersOffer delivery for bulky items and rents carracks for convenience to customers

Stores are designed around a "one-way" layout and aStores are designed around a "one-way" layout and aisles are wide to reduce traffic in the isles are wide to reduce traffic in the storesstores

Offer gifts and certificatesOffer gifts and certificates

IKEA's furniture is designed to be assembled by the consumerIKEA's furniture is designed to be assembled by the consumer

IKEA holds “Antibureaucracy Weeks” on regular basisIKEA holds “Antibureaucracy Weeks” on regular basis

Executives work on shop floor or stockroom, operate cash registers, even load trucks and cars Executives work on shop floor or stockroom, operate cash registers, even load trucks and cars for customersfor customers

IKEA does not accept cheques – only cash and credit cardsIKEA does not accept cheques – only cash and credit cards

KEY REASONS FOR KEY REASONS FOR SUCCESSSUCCESS The IKEA brand is associated with simple, low The IKEA brand is associated with simple, low

cost, stylish products.cost, stylish products. did not customize its products to local did not customize its products to local

markets, but kept to standardized products markets, but kept to standardized products and operations worldwide. and operations worldwide.

IKEA developed a model for the business, IKEA developed a model for the business, where it was able to keep costs low.where it was able to keep costs low.

IKEA had excellent international procurement.IKEA had excellent international procurement. It had excellent supply chain management It had excellent supply chain management

and utilized the latest IT infrastructure.and utilized the latest IT infrastructure. Anticipating the needs and wants of Anticipating the needs and wants of

customers. customers.

ACTIONSACTIONS

Focus on customer service.Focus on customer service.PROS- Identify trend in customers.PROS- Identify trend in customers. Benefit from in-depth knowledge.Benefit from in-depth knowledge. Avoid problem in future.Avoid problem in future.CONS- CRM is costly.CONS- CRM is costly.

Focus on correct placement of storesFocus on correct placement of stores..PROS-Correct placement is key to IKEA’s future PROS-Correct placement is key to IKEA’s future

growth.growth.CONS- Too narrow. CONS- Too narrow.

Expand product linesExpand product lines..

PROS-Helps IKEA penetrate a new market.PROS-Helps IKEA penetrate a new market.

CONS- Its own name and promotion CONS- Its own name and promotion campaign, which is cost prohibitive.campaign, which is cost prohibitive.

““pull” marketing strategypull” marketing strategy..

PROS- encourage consumers to make the PROS- encourage consumers to make the purchase.purchase.

CONS- difficult to implement.CONS- difficult to implement.

IKEA had to change the model of IKEA had to change the model of operating, giving greater operating, giving greater ownership to its target country ownership to its target country subsidiary, to become polycentric subsidiary, to become polycentric - storesstores

CHALLENGES IN US CHALLENGES IN US MARKETMARKET Reluctance to change furniture: Reluctance to change furniture:

mind set of Americans.mind set of Americans. Value added in high-end furniture Value added in high-end furniture

retailer.retailer. Consumer preferences.Consumer preferences.

Managing sustainable Managing sustainable growth for the future IN growth for the future IN USAUSA market leader strategy.market leader strategy. find new users.find new users. IKEA Club IKEA Club IKEA should endure IKEA brand. IKEA should endure IKEA brand.

IKEA’S TRADE-OFF IN IKEA’S TRADE-OFF IN USUS US customers are very demanding.US customers are very demanding. Free delivery service should be continued.Free delivery service should be continued. Customisation should be done in tune Customisation should be done in tune

with local suppliers.with local suppliers. Franchisees should be given to local Franchisees should be given to local

people .people . Promotional strategy should be in Promotional strategy should be in

accordance of the tastes of local people.accordance of the tastes of local people.

SWOT AnalysisSWOT Analysis

Strengths Strengths – Cost efficiencyCost efficiency– Special perks Special perks

(café)(café)– Store layoutStore layout– Variety of Variety of

productsproducts– Assembly service Assembly service

offeredoffered– Brand name Brand name

equityequity– Large inventory Large inventory – Value priced Value priced

furniturefurniture– Scale of Scale of

economieseconomies– Large supplier Large supplier

chain – 1800 located in 50 chain – 1800 located in 50 different countriesdifferent countries

– Delivery service Delivery service – Infrastructure system – Infrastructure system placeplace

WeaknessesWeaknesses– Limited number of styles Limited number of styles

(not everyone likes (not everyone likes contemporary-modern)contemporary-modern)

– Customer has Customer has to assemble the to assemble the productproduct

– Product may not Product may not be as durable depending be as durable depending on who assembled iton who assembled it

– Low customer Low customer service available on service available on retail store floorretail store floor

– Customer has Customer has to pick furniture up to pick furniture up from storefrom store

– Self-Serve Self-Serve shopping experience shopping experience

– 28% of people 28% of people below poverty linebelow poverty line

– Per capita Per capita income substantially lowincome substantially low

SWOT AnalysisSWOT Analysis

ThreatsThreats– Language barriersLanguage barriers– Counterfeit and Counterfeit and

substitute substitute productsproducts

– CompetitorsCompetitors– Copycats (many Copycats (many

local carpenters local carpenters can make and sell can make and sell the product the product cheaper)cheaper)

– High import High import taxestaxes

– Risk of economic Risk of economic instability or warinstability or war

OpportunitiesOpportunities– Joint venturesJoint ventures– Collaboration with Collaboration with

other companiesother companies– Collaboration with Collaboration with

UnicefUnicef– Huge market Huge market

potentialpotential– Western ideas Western ideas

and products and products valued by Indiansvalued by Indians

– More apartments More apartments and housing and housing leases– especially leases– especially among younger among younger generationgeneration

Joint VentureJoint Venture

Alliance with local partner advantages:Alliance with local partner advantages:– Can provide valuable input into the opportunities and Can provide valuable input into the opportunities and

threats of local marketthreats of local market– Will reduce strategic risk that may result from Will reduce strategic risk that may result from

political, legal, and financial issues.political, legal, and financial issues.– The venture will increase market coverageThe venture will increase market coverage– IKEA could further expand into other market segments IKEA could further expand into other market segments

in which the strategic partner is already establishedin which the strategic partner is already established

Alliance with local partner disadvantages:Alliance with local partner disadvantages:– Loss of control over some business functionsLoss of control over some business functions– The partner may eventually become a competitor to The partner may eventually become a competitor to

IKEAIKEA

Any questions???Any questions???

Thank you for your Thank you for your attention!attention!

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Ikea