Marketing case study

MARKETING MANAGEMENT

CASE STUDY

IKEA

Members

Ikram Zohar Mohamed B0250KDKD0213

Feifei Ji B0243VLVL0213

Ilham El Mhadder B0266FAFA0213

Saumen Adhikary B0253RBRB0213

Marin Ivanov Mihaylov B0247MAMA0213

Seth Fielle Fearon B0262KDKD0213

Yuksel Cam B0244KGKG0213

Maryam Khurshid B0263KKKK0213

Contents

1. Introduction…………………………………………………………………..…1

1.1 IKEA’s Growth………………………………………………………..……1

2. Question 1………………………………………………………………….......2

2.1External Factors........................................................................................2

2.2External factors Analysis (Porters Analysis)............................................4

3 Question 2………………………………………………………………………6

3.1 SWOT

Analysis...............................................................................................6

3.2 TOWS Analysis...........................................................................................7-

8

4 Question 3……………………………………………………………………..10

4.1 How IKEA reduce Carbon Footprint? ...................................................10-13

5 Question 4…………………………………………………………………......14

5.1 Social Responsibility……………………………………………...……14-15

6 References………………………………………………………….………16-17

1.0 Introduction

IKEA is an international well recognized Swedish home furnishing retailer. Established on

1943, its core product is wide range of self-assembling well designed low priced products, which

reduce the packaging and transport cost. They are concerned as well by the actual environmental

problems which push them to find new ecological ideas to reduce the pollution, raw materials

and natural resources. Those made IKEA the biggest furniture retailer in the word with more

than 253 stores dispersed in at least 24 countries, in addition of more than 32 owned and run by

franchises. It success consequence is the number of visitors that reached by 2008 more than 250

millions in stores and more that 450 millions on there own online website and sales in total

heated a pick of 21.2 billion Euros.

1.1 IKEA’s Growth

Marketing Management: Group Course Work Page 1

Design of Furnishing and Introduction of

FLAT-PACKAGING

Flagship store in Stockholm and Birth of Self-

Serve Furniture Shopping.

First store outside

Scandinavia in Switzerland then

Germany, Holland and

Eastern Europe expansion and first US store

outside Philadelphia then Washington and

Baltimore.

12 Stores in the US, then Asia,

Russia, China and Iceland.

154 Stores in 22 Countries at the

end of 2002.

1950

1950

1960

1960

1970

1970

1980

1980

1990

1990

2000

2000

2.0 Question 1

The company is affected and faced by many different complex variables, some are internal to the

organization, and hence, they are controlled by this later. Others are external, uncontrollable

forces that present challenges and opportunities, IKEA need to learn how to take advantage from

them to keep it s position in the market. The external factors to the organization may be analyzed

using “PESTEL Analysis”

2.1 External Factors

Political and legal influences

are variables that appear to change very slowly, thus, it still important policies that may affect

the company heavily, the marketing system is usually influenced by political and legal forces

such as the government monetary policies, import and export laws, anti-pollution roles … until

now there is no data registered against IKEA, the political situation remain steady and the parties

respect the agreement. Moreover, IKEA’s strategy “environment protection” in order to reduce

the pollution, the raw material used and the energy reinforce its position and seem to be

respecting legal and political policies.

Social and cultural environment

The marketing program needs to be adjusted according to, first of all the cultural differences that

consist on the complex societal elements such as values, beliefs and preferences. Equally the

demographic and behavioral study need to deal with the quantitative elements for instance age,

sex,, religious, geographical concentration and dispersion and income … and the qualitative

aspects for example motivation, attitude and perception.

As a Scandinavian company, IKEA beliefs that the perfection and the suitable design for

everyone that may last longer is the best product to offer, in contrast and because of cultural

differences such us the American preference for functional ability of the product. Even that, the

USA stills its second biggest market in the word


Economic forces

Is a huge complete system where people, material and energy are converted to a product or a

service and distributed for a final use? It represents an obvious common factor for all companies

and plays an important role in the marketing system.

The financial recession is by far the greatest issues IKEA faced starting from 2008 until

nowadays, it reduce the population purchase power, by consequence, IKEA need to reanalyze its

marketing strategy , pricing and promotion methods to make sure it would survive this difficult

period,

Its projects to open 21 new stores in 11 different countries in order to be close to the customer

need a huge budget, it is important for IKEA to reconsider those plans.

Also over time the Swedish kronor got a stronger value against some other money which made

the importing cost of materials more expensive.

Technological influences

Technology is an important part of today and everyday lifestyle for the modern customer, it

is important also to highlight that technology is a wider driving force for change. The major

factor that makes IKEA uniqueness is that modular products are ready to self-assembly, easy

to transport in flat-packs which reduce damage risk, packaging costs and transport and

technical assistance. It is benefic in the first position to the costumer because it reduce his

charges, also it reinforce his trust on the brand which is IKEA goal.


Figure 1: Author

In addition to the intern and external factors, the competitive environment influence the company

performance even the marketing strategy is considered reaction against the competition. This

later level is affected by four forces.

2.2 External Factors Analyzing (PORTERS FIVE FORCE MODEL)

Bargaining power of suppliers

All over the word, IKEA had a well established relationship with its suppliers. It own as well

manufacturing companies. It means that IKEA is able to manipulate other retailers’ prices.

Bargaining power of costumers

Many companies are directly competing against each other. Retailers are importing from china,

which means that similar products are present in the market and the customer is free to choose

the product that suit him easily. IKEA needs to keep unique and its innovative spirit, which

attract millions of customers to its stores instead of others.


Technological Ecological

Political Legal

Economical Social

PESTEL Analysis

The threat of new entrants

the intensity of competition may be difficult and scary for new entrants, it require to invest a big

amount of money, establishment of contract and relationship with suppliers, a suitable location

and a perfect product to launch into the market. IKEA is again a well established company, it

isn’t easy to get powerful as they are especially experienced and present in the market for

decades.

Threat of substitutes

The image of IKEA brand is well recognized and respected especially due to it s green program,

reduced carbon foot-print, recycled materials and reduced use of row materials. The competition

is giving slogan to go green but there basic ways of work still the same. This means that IKEA is

safe.

In order to improve its performance, IKEA need to revise its standardization strategy to cope

with the competitive environment and face the complex external factors that are specially the

cultural different markets that are a result of the expansion goals of IKEA and its need to be

successful internationally.

IKEA have to satisfy the customers’ needs, but adapting its marketing strategy with the

population way of living, values, preferences and design products and services suitable to each

market

IKEA have to opt of customization and leave the standardisation concept.


3.0 Question 2

3.1 SWOT analysis

IKEA’s success in business depend on it s knowledge of itself. Use of the SWOT Analysis helps

the company to identify its strengths, weaknesses, opportunities and threats. This will focus

essentially on environmental, social and economic issues to take the company through the actual

financial crisis.

Strengths and weaknesses are controllable internal aspects which include machinery, employees,

money and management. Those opponents differentiate the company from competitors and

represent the areas where the company does very well. The later are the areas that the company

needs to capitalize on them, to improve, in order to survive.

Opportunities and threats are both external uncontrollable factors such us the economic climate,

technology, competitive forces and ecology…, the first represent everything that may increase

the company benefit, when the second are the things that are open to competitors that may hurt

the company.

INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT

EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT

Figure 2: Author


3.2 TOWS Analysis


Opportunities

Go green: reduction of carbon footprint and water use.

Programs against wastewater and a sustainable use of resources.

The huge demand for low priced product: consumers are more likely to purchase from low

priced shops especially cause of the current financial crisis.

Online ideas: to maintain order in stores, make easy to current customers the possibility to

be updated without being oblige to move.

Social responsibility: IKEA’s goals include a charity programs to support underprivileged

and people with special needs all over the word

Communication: being open with suppliers, customers and co-workers in order to build a

sustainable trust.

Long term partnerships: with suppliers by selling a huge volume of products over the years,

it benefits suppliers who get guaranteed orders.

Economies of scales: buying a huge mass at cheaper unit cost.

Lower carbon footprint: reducing transport cost by sourcing materials from suppliers directly to IKEA stores.

Threats

Competitors: are proposing low priced product: IKEA is obliged to reinforce its qualities and

maintain its green and charity projects to differentiate itself from the others

The financial crisis: is slowing down the consumer budget.

The consumer behavior: IKEA have to know how to attract new customers and retain old

ones. Social responsibility: IKEA’s goals include a charity programs to support

underprivileged and people with special needs all over the word

Communication: being open with suppliers, customers and co-workers in order to build a

sustainable trust.

Long term partnerships: with suppliers by selling a huge volume of products over the years,

it benefits suppliers who get guaranteed orders.




Strengths

Strong brand: clear, promise the same quality services in stores and products all over the world

Low priced products: a good price/quality ratio which is the customer mean research.

Well designed products: a wide range offered to suit all ages and every lifestyle.

Functional: modular product, easy to use and to transport.

Increased use of renewable and recyclable materials.

Reduction of the amount of the raw materials by the use of new technologies.

Long term partnerships: with suppliers by selling a huge volume of products over the years, it

benefits suppliers who get orders.



Weaknesses

Image: the consumer view is affected by the work conditions in some countries where the

legislation, legal work policies and human rights aren’t respected.

Product low cost: the financial crisis and Swedish kronor force may alter IKEAs project for a

good price/quality products, IKEA need to balance this in order to be different from

competitors.

Communication: IKEA need to keep updated its publication about its environmental activities

and its charity project which push people to purchase from its stores rather than others who get

a guaranteed order.



the same basics are comprehended in the TOWS analysis, the manager study at first the external

factors which are the opportunities and threats to minimize, this study is translated in actions

planed to make the company progress. Strengths and weaknesses are studied at the end.

OPPPORTUNITIES THREATS

STRENGH

WEAKNESS

Figure 3: Author

SO: the attack strategy which is translated by using the strengths in order to take profit from the

advantages

WO: minimise weaknesses by taking advantage of the opportunities which is the attack strategy

by building the strengths

WT: avoid threats by minimising the weaknesses which is a defensive strategy

ST: avoid threats by using strengths whish is a defensive strategy

IKEA is a well recognized brand established over the word that have many opportunities to take

advantage of them and create marketing strategies to improve its weaknesses defend threats.

Its pricing targets is essentially customers with a low spending force, they have to keep its prices

as low as possible. especially, its a huge company that enjoy very well the economy of scale that

allow them to introduce to the market a low priced products which help to keep customers

loyalty and create a bigger difficulties to the small companies to enter the market. They can as

well help its customers online with ideas for their interior decoration and also provide them with

online assistance to reduce their impact on the environment and save their money.


SOSO STST

WOWO WTWT

4.0 Question 3

4.1 How IKEA reduce carbon footprint?

IKEA is a reputed organization in the market for its high quality furniture. IKEA’s concern for

people and the environment can be seen from its day-to-day activities.

IKEA is an environment friendly organization. IKEA’s better use of raw materials and energy

has made the company to use fewer resources as possible without wasting it. When using

resources for their production IKEA follow a procedure where they try to reduce and reuse

resources in production and also recycle their waste to use it as a raw material.

REDUCE

RECYCLE REUSE

Figure 4: Author

IKEA is based on some core principles toward the environment. They are;

How IKEA use renewable energy

How to protect natural resources

How to treat the people in and around the company

How to help customers live a more sustainable life


From its core principals we can see

that IKEA has given a huge

important to its environment and for

its safety. IKEA light up their

building using LED bulbs which

uses 85% less energy than old

incandescent bulbs. These lights

can

last for around 20 years. They use

led lights in their products too.

IKEA’s delivery trucks are at

least 60 to 70 percent full, and

replace 1.2 million light

sources in stores with LEDs,

following from IKEA

announcement earlier in

2012m, it would sell only LED

lights in store from 2016.This will give a chance for their customers to involve in their

environment friendly approach (Guardian, 2012).

In 2008 the total emission of CO2 has increased from its operations, however when we look at its

total emission of CO2 in 2005 we can see a positive improvement.

Figure 5: IKEA sustainability report, 2008

IKEA has a concern for its environment. We can see that through their products. ‘’NORDEEN’’

tables and ‘’OGLA’’ chairs are a very good examples of how IKEA produce environment

friendly by using resources more efficiently. Less use of water, zero waste for landfill is even

some methods where they follow an environment friendly method to reduce carbon foot print.

Being a responsible organization in the market it’s a responsibility of the furniture giant to

educate or to inform their customers about its contribution towards saving the environment.


IKEA’s online help and guides for its customers to help reduce the impact on environment from

its products has developed rapidly with a great result, this has resulted their sales as now

customers prefer greener products rather than products that destroy our mother nature.

IKEA has been in so many projects which help them to reduce their carbon footprint, the great

example for that would be Green Gas Protocol by road testing a new global framework for

measuring Greenhouse gas emission. IKEA is planning to reduce its carbon footprint in every

possible way, A pilot programme which is in place helps the organization to reduce its carbon

footprint by 30% or more by 2011 (environment leader, 2010). China is a very good example,

which has already reduced their carbon footprint by 40%.

IKEA has reduced its CO2 emission by 5% and CO2 emission from good transport by 10% in

2009 (environment leader, 2010). IKEA’s store in Dublin plays a huge role in reducing carbon

emission as they provide free home delivery to all the orders done from their store, as there in no

public transport to get in to the store and people have to come from their own vehicle, which

might end up in a huge emission of CO2 to the air (The Irish Independent, 2007). IKEA is

looking for any possibility to move towards a more regional rather than global production. This

might lead the business to shorter lead times, low transportation costs, less exposure to currency

fluctuations and less incremental economic of scale advantage. Relocating the production closer

to the sales market would allow the company to reduce its impact on the environment. The

following figure shows the impact on climate from IKEA’s transport.

Figure 6: IKEA

sustainability

report, 2008

Another great

success from

IKEA is that it

has moved from

regular power

source to solar

power. Eight


stores in California are currently using solar panels to light up their building and it has reduced

their use of power by 66% in 2010(Kim, 2010). According to Steve Howard, chief sustainability

officer at IKEA Group, IKEA is set to invest €1.5bn in solar and wind energy projects through to

2015, in order to help the company to meet its new targets (Guardian, 2012).

IKEA is an example for other companies in the market. Mark Kenber, chief executive of The

Climate Group, promote other companies to follow the lead.

"To accelerate the scale up of clean energy and move to a low carbon economy we need

businesses to take decisive and proactive leadership that translates into transformative change,"

he said. "We urge other businesses to follow IKEA's lead and place sustainability at the heart of

business planning’’ (Guardian, 2012).

IKEA has a solution for every problem it faces. We mentioned that it uses solar power to light up

their buildings, but it’s not possible to use solar panels in every country. So do they have a

solution for that? Yes they do

They also invest in wind turbines in countries where the sun doesn’t shine so much. Today,

more than half of the energy used in IKEA buildings comes from renewable sources. Its goal is

100% renewable energy. The company’s focus to use alternative energy has achieved them to

use energy sources for heating such as ground source heat pumps, air heat pumps, biomass

boilers and is progressing on its alternative fuel project for transport their goods to stores and for

customers.


5.0 Question 4

5.1 Social Responsibility

Accountability

Accountability as explained by Milton Friedman, is to increase profit(Friedman.M, 1970).The

accountability will help the company itself to make proper decision with reference to the past

years performance, and this will help shareholders to understand the day to day running of the

company!

Ethical behavior

According to business dictionary the ethical behavior is "acting in ways with what society and

individuals typically think are good values, it tend to be good for business and involves

demonstrating respect for key moral principles that include equality, dignity, diversity and so

on."(Business Dictionary.2013) IKEA is known to be concerned about the children right, that is

not to use children labor, but for internal IKEA helped in following the forest standardship

council and also a good partner to UNICEF (Arrigo.E, 2005) IKEA tried to conduct business by

providing low or considerable prices for their customers. (IKEA, 2005)

Human rights

Human rights are rights inherent to all human beings; it can be as the natural rights or as legal

rights. (Wikipedia, 2013. United Nations Human Rights, 2013)

The IKEA eliminated PVC from its product because it posed a potential threat to human health,

also they don’t use the children labor. The company protects the natural rights and legal rights to

the customer. (Perderse.E.R,Andesem.M, 2006) Thus the society has got the human right to be

safe with the products they purchase or use.


http://www.ohchr.org/en/issues/Pages/WhatareHumanRights.aspx

Respect for stakeholders

Respect for stakeholders interest opinions and influence is very essential when running a

company, “stakeholders are those who may be affected by or have an effect on an effort of a

company” (Rabinowitz.P.2013).

In 1981, the aim of the public company in Denmark about high levels of formaldehyde in

particleboards, they were sued and lost 20% of the Danish market. This was done by the aid of

the stakeholders influence. (Marlon.E.J.M, 2006)

Respect for internal norms and principles

According to the Mitsubishi corporation code of conduct (Mitsubishi Corporation.2013) “All

officer and employees must comply with all applicable laws, rules and regulations they operate”

when employees abide the norms of the company it helps them to work in a way that portrays a

positive image to the environment.

Transparency

Transparency in business is openness, communication and being accountable to the parties

involved, transparency is the gallantness of running a company for other to see what is going on

in the company. For example, it is required by law to publish their accounts at the end of every

financial year (Wikipedia, 2013)

Environment:

IKEA engages in the production of eco-friendly or eco-saving of products. Also with the help of

local recycles, IKEA takes the initiative of recycling of furniture ( IKEA,2009).

IKEA also takes into considering the materials for its products. About 80% of IKEA’s supplier

from Easter Europe and South Asia practice low environmental practices and IKEA educates its

suppliers about the Western Europe environmental regulations and advice on “Suitable technical

solutions to reduce bad environment impact (Marlon.E.J.M, 2006).


6.0 References

Environmental leader, 2010 [online] available at: http://www.environmentleader.com/2010/05/19ikea-reduces-co2-emissions-by-5.html [Accessed 17 march 2013]

Guardian, 2012 [online] available at: http://www.guardian.co.uk/environment/2012/oct/23/ikea-clean-energy [Accessed 19 march 2013]

IKEA sustainability report, 2008 [online] available at: http://www.unglobalcompact.org/system/attachments/1292/original/COP.pdf [Accessed 19 march 2013]

Irish Independent, 2007 [online] available at: <http://www.independent.ie/irish-news/ikea-set-to-subsidise-homedelivery-service-26271873.html> [Accessed 17 march 2013]

Kim, E, 2010, IKEA goes Green with solar panels, Dayton business journal, [online] available at: http://www.bizjournals.com/dayton/stories/2010/10/11/daily29.html [Accessed 17 march 2013]

riedman.M.1970. ‘The Social Responsibility of Business is to Increase its Profits.’ The New York Times Magazine, [online] available at:

http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

Business Dictionary.2013. ‘Ethical behavior’, [online] available at:

http://www.businessdictionary.com/definition/ethical-behavior.html

Arigo.E.2005. ‘Corporate Responsibility and Hypercompetition. , The IKEA Case’. SYMPHONYA Emerging Issues in Management. ISTEI - University of Milan-Bicocca. p37-57

Wikipedia,2013. ‘Human rights’, [online] available at:http://en.wikipedia.org/wiki/Human_rights

United Nations Human Rights,2013. ‘What are human rights’, [online] available at:

http://www.ohchr.org/en/issues/Pages/WhatareHumanRights.aspx)


http://www.ohchr.org/en/issues/Pages/WhatareHumanRights.aspx

http://en.wikipedia.org/wiki/Human_rights

http://www.businessdictionary.com/definition/ethical-behavior.html

http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

http://www.bizjournals.com/dayton/stories/2010/10/11/daily29.html

Pedersen. E.R, Andesen.M. 2006. ‘Safeguarding corporate social responsibility (CSR) in global supply chains: how codes of conduct are managed in buyer-supplier relationships’. Journal of Public Affairs. WUey InterScience Vol.6 PP.228-240

Rabinowitz.P.2013. ‘Identifying and Analyzing Stakeholders and Their Interests’.The Community Tool Box, [online] available at:

http://ctb.ku.edu/en/tablecontents/chapter7_section8_main.aspx

Marlon.E.J.M, (2006). ‘Juggling with three balls: An exploratory study on how IKEA,Philips, and Unilever implement and communicate corporate social responsibility’

Mitsubishi Corporation.2013. ‘Mitsubishi Corporation Conduct of Conduct’, [online] available at: http://www.mitsubishicorp.com/jp/en/about/philosophy/code.html

Wikipedia,2013.‘Transparency(behavior)’ , [online] available at: http://en.wikipedia.org/wiki/Transparency_%28behavior%29


http://www.mitsubishicorp.com/jp/en/about/philosophy/code.html

http://ctb.ku.edu/en/tablecontents/chapter7_section8_main.aspx

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