IKEA’s Business

IKEA is an international home product company that designs and sells ready to assemble furniture appliances and home

accessories

IKEA’s Founded

Furniture IntroductionFurniture Catalogue

196519581957195619551953194719431926 1951

IKEA designs its own FurnitureIKEA introduces Flat packages IKEA stores open at

• Almhult• Stockholm

IKEA’s Timeline

IKEA’s Company History*

*Source: www.ikea.com

MARKETING ANALYSISSWOT, PEST and the Marketing Mix

INTE

RN

AL

EXA

M EXTER

NA

L EXAM

SWOT

W

O

T

S

STRENGTHS• Wide range of products and styles• Cheap and affordable• One stop shop• Easy shipping and transportation• Eco friendly and recycling of

products• Functional design of products• Appealing shopping experience

OPPORTUNITIES• Untapped markets like middle east

and Asian countries• Better advertisements• Online sales• Demand for greener and

environment friendly products

WEAKNESSES• Assembly of furniture• Yet to invade upcoming global

markets• Products don’t last long• Product dimensions unsuitable for

global markets• Advertisements in the form of

catalogues mostly

THREATS

• Organized sectors like Wal Mart, Office Depot, Staples, etc.

• Unorganized sectors like local manufacturers and carpentry stores

• Competitors opting for similar designs with a contemporary twist to cater to upper class

POSITIVE INFLUENCES

NEGATIVE INFLUENCES

• FDI Policies• Labor laws • Taxes and duties• Environmental LawsFurniture

Market

Political

P

• Recession reduces disposable income and hence the demand (Low prices advantage)

• Enjoys economies of scale• High barriers of entry for

competitors due to low prices offered to consumers

EconomicE

• Lesser carbon footprints• Ecologically sustainable• Recyclable products• Online tips on reducing

environmental impact (CSR)

Social S

• Flat sized packaging• Innovative designs

Technological

T

PEST Analysis

4P's Marketing Mix

Marketing Mix

Product

Price

Product Price MixSTYLE

PRICE RANGE

Scandinavian (Sleek Wood)

Modern(Minimalist)

Country (Neo-traditional)

Young Swede (bare bones

High

Medium

Low

IKEA's Product Price Matrix

Finding Smarter ways to make Furniture

Strategy followed by IKEA

Price

Quality

Implementation Steps

Establish Retail Price

Select Manufacturer

Determine the material used

Design Process

Step 1: Establish Retail Price

• Using the matrix, IKEA would set the price range.

• It would survey the competition to establish a benchmark and then sets its own price point 30-50% lower than rivals.

Step 2: Select Manufacturer

• More than 1800 manufacturers in more than 50 countries

• Build long term relationships• IKEA circulates a description of proposed

product's specifications and target cost and encouraged them to compete for the production package

• Sometimes it might have different product component from different supplier

Step 3: Determine the material used

• Done by IKEA engineers• Focus on cost efficiency• Using different types of wood for a

single wooden product• Using high quality materials on

furniture surfaces that were visible and most likely undergo stress

• Using low quality material on surfaces that were low stress and less visible to the customer

Step 4: Design Phase• Use internal competition to select a

designer• Flat packaged boxes to make it easier

for consumers to transport the furniture home + save shipping costs

4P's Marketing Mix

Marketing Mix

Product

Price Placement

Customer Experience at IKEA

• Bright and inviting experience for customers

• Resembles Modern Theme park with childcare centers

• Restaurants serving various delicacies

IKEA for kids:You shop, kids play

• IKEA provides clean feeding and changing rooms for small children

• Restaurant has a special menu just for kids

4P's Marketing Mix

Marketing Mix

Product

Promotion

Price Placement

Communication Strategy for America

Perceptual Map

Segmentation

Video 1

Video 2

Video 3

IKEA INVADES AMERICA

2002200120001999199819971985 Mid 1990’s

First store

Company’s fortune changes

Revenues double ($600 mn to $1.27 bn)

3rd largest store

PROMOTION STRATEGIES

•Commitment-free approach to furniture – “Unboring” advertisement•Web site advertisement•The Law of Candor : When you admit a negative, the prospect will give you a positive•The Law of the Category: If you can’t be the first in a category, set up a new category that you can be first in•Additional Customer facilities: child-care, restaurants and help desk

INDIAN FURNITURE MARKET•As of 2006, the Indian furniture market is estimated to be worth US$ 7.9 billion

Source: http://www.ibef.org/download/Furniture_170708.pdf

PROBLEMS FACED BY INDIAN FURNITURE INDUSTRY

Source: http://online.wsj.com/news/articles/SB10001424127887324266904578458840277908564

IKEA INVADES INDIA

Market Development Diversification

Market Penetration Product Development

Products & Services

Mar

kets

Existing New

Existi

ngN

ew

IKEA’S INITIAL COMMUNICATION STRATEGY IN INDIA

Integrated Communications Strategy

IKEA’s communication strategy*• Media Channels covered– TVC– Print– Digital

• Pull Strategy• CSR initiatives

Source: http://www.livemint.com/Money/jI27GvmsK5stzTn61yyWUN/Ikeas-consumer-challenge-in-India.html