Individual Situation Analysis and Marketing Objectives Company: IKEA - Case Study Example

Individual Situation Analysis and Marketing Objectives - IKEA (Swedish Furniture Company) Executive summary The paper covers an in depth analysis of IKEA the world’s largest furniture products retailer which has its origin from Sweden. IKEA has many store located in many different parts of the globe. In Australia it is one of the main furniture retailers. Its well established marketing and distribution system in Australia also includes an online store for customer convenience. IKEA’s target customers are middle income earners. They form the base of the main customer’s who visit IKEA’s stores. The main strengths are high quality products that are sold at low prices, good relationship with its suppliers and a strong global brand which attracts customer’s to its stores. The weaknesses is that it has a large number of store which make it difficult to control the quality of the products, the need for having a good customer service for its clients and producing high quality products at low cost to maintain its customers and differentiate it self from competitors by selling at low prices. The improving technology provides an opportunity to improve its design and quality which would increase the customers. The main threat is that it faces many small scale retailers who are also selling low priced house hold products. There is also a slow down in the market as the number of people who are entering the housing market are few due to the economic recession. The economic recession has reduced the purchasing power of the people. The main resources of the company are the cash flow and good relation with both customers and suppliers. Table of contents Executive summary …………………………………………………………………….2 Introduction……………………………………………………………..………………4 Company background………………………………………………….……………….4 Current market situation……………………………………………….….…………….4 a) Internal environment ……………………………………………………..…….4 I. Market growth strategy……………………………………………..…..5 II. Products ………………………………………………………………..5 III. Customer analysis ………………………………………………...……5 IV. Company resources…………………………………………………..…6 b) External environment ………………………………………………………….6 I. Industry analysis ……………………………………………………….6 II. Competitor analysis …………………………………………………....7 III. Key market trends………………………………………………………7 Economic growth and stability trends…………………………..7 Legal and regulatory trends……………………………………..8 Social and cultural trends ……………………………………….8 Environmental trends…………………………………………....8 IV. SWOT analysis…………………………………………………………..8 Strengths …………………………………………… …………9 Weaknesses ………………………………………...………...….9 Opportunities ………………………………………………..…9 Threats …………………………………………………………10 Marketing objectives ………………………………………………………………..….10 List of references ………………………………………………………………………..11 Individual Situation Analysis and Marketing Objectives Introduction The furniture industry is one of the major sectors in the economy in Australia. This paper describes in depth how IKEA can improve its marketing strategy by using strategic marketing to increase its market share in Australia. The paper takes into account a situational analysis, SWOT analysis and marketing objective. The situational analysis discusses the internal and external environmental variables that are likely to affect the company in the market. The SWOT analysis summarizes the strengths, weaknesses, opportunities and threats as discussed in the situational analysis. Company background IKEA is the world’s largest furniture retailer. It was founded in Sweden by Ingar Kamprad. It’s privately owned and deals with readymade home furniture products (Kippenberger 1997, p. 33). The company is international and operates 343 stores in 38 countries. The company owns 256 stores in 26 countries while the others have been franchised. The company employs 127,000 people and has a net income of $2.7 billion. The company has a focus on reducing costs on its operations and therefore sells its furniture cheaply to the customers. The show rooms of the company are also designed in such a way that they attract the customers who buy the furniture. They arrange the furniture to provide ideas to the customers for their kitchens, bedrooms, bathrooms and other places in the house. Current market Situation Internal analysis This section deals with the company’s internal environment that gives the company a competitive advantage over its competitors. Market Growth strategy The mission statement of any organization states the objectives and purposes of the organization and act as a guide to the staff in achieving the objectives. Marketing is one of the key factors that support the mission, vision and growth strategies of a company. The furniture industry is very competitive due to the presence of many products in the market. IKEA has done intense marketing which has led to the recognition of its brand globally. It markets a lifestyle that everyone in the world recognizes. This has made the company to achieve great success globally and therefore achieving the objectives of its mission. Products IKEA has done a lot in the area of product promotion in the past to ensure that it has a competitive advantage. The products offered by the company are very cheap compared to what competitors offer (Howell 2006, p. 101). This is one of the reasons why many people like shopping at IKEA. The company also designs products that are beautiful and inexpensive. This is made possible by the company having low cost suppliers located in different parts of the globe. Some of the products are also customized to sell in the local markets. The company also boosts many stores in its supply chain and has plans to roll out more stores in the future. The company also does extensive promotion of its brand which is important for the company. Customer analysis IKEA mostly targets middle income earners in the economy. The customers IKEA targets have the same spending habits which are similar. Most of the customers of IKEA are new home owners who are stocking their homes and people who are replacing items in their houses. The customers need products that are stylish to put into their houses (Daniels 2004, p. 44). IKEA has managed to attract these customers into their store by offering beautiful products at low prices and many of the customer’s who visit the company’s store end up buying more items. The low prices cause the customer’s to spend more than they had planned initially. Company resources The company has various resources both current and anticipated that help it in the day to day operation. These resources include sales cash flow and good relations with the key suppliers and customers. The strong customer relation causes high demand for new and stylish furniture which has increased customer numbers due to the low pricing strategy. The relationship with the suppliers is also very cordial and ensures that there are no interruptions and prices remain low considered to competitors and high cash flow is obtained from high sale to the customers in the stores. External environment The review includes an analysis of the external factors that can interfere with the furniture market for IKEA Industry background Overall, globally the furniture market has been changing over the years. It is no longer restricted to manufacture of chairs beds or tables. It includes the manufacture of a range of home appliances and interior design to make the house look classy and stylish (Armstrong & Kotler 2006, p. 234). The furniture industry has continued to grow in many countries of the world. This can be attributed to growth in economy, lifestyles changing, increased incomes and migration to urban centers’. The industry is highly fragmented with both large scale and small manufacturers. The consumers for furniture product are mostly the people aged between 25 and 44 years. This is the age group of people consist of people who are recent home buyers and those who are replacing old furniture. Competitor analysis On an extensive level the company is competing with many other companies producing similar products in the industry (Edvardsson & Edquist 2002, p. 153). As noted earlier the industry is highly fragmented with many manufacturers. In most countries in which IKEA has stores it accounts to five to ten percent of the furniture sold. Global competition has been turf over the years for the company. The companies have had to struggle in production of competitive products. The main strategy that is used by the companies is they are acquiring plants in areas with low cost and closing plant in places where it’s more costly to produce. The goods are then shipped to the markets where production is costly. Key market trends Economic growth and stability trends Despite the rise in fuel prices, fading optimism of consumers and other factors that affect the prices of furniture the future of the furniture industry looks to be bright. The spending by consumers is set to increase due to the increase in the number of youth who are spending on the furniture products. Legal and regulatory trends The legal and regulatory framework has also impacted on the furniture market. The governments and trade councils have set standards that have to be met by furniture manufactures when designing their products and using the resources. Technological advancements Furniture manufacturers are now focusing on how the modern technological changes can fit into their designs. The companies are producing furniture that is more contemporary and looks more modern. The furniture today looks cleaner with more hardware and better finishes. Social and cultural trends The product style and selection among the youth has continued to change. More than ever before people are chasing the best outfit for their room décor. More sophisticated designs are being made for styles from different countries. Environmental trends People are now accommodating an eco friendly lifestyle. Going green has become the norm in many places across the globe. With the rise of green movements people are looking to spend on furniture that is more sustainable into the future. The standards set by the sustainability councils are being applied. SWOT analysis This SWOT analysis summarizes the internal and external factors affecting IKEA Strengths The first strength of the company is that it has a strong and internationally known brand which attracts many customers to the company’s stores (Kling & Goteman 2003, p. 31). The company focuses on reducing the cost of production and therefore the selling price is low for its products just according to its vision. The company employs internal specialists to design its products therefore they are of a wide variety and stylish and it also has an established network of stores. Lastly the company has maintained long term cordial relationship with suppliers which ensure that high quality materials are supplied cheaply Weakness The first weakness is that company has many of its stores in Europe therefore it depends mostly on Europe for most of the sales and also has a large number of store which makes it difficult to control product quality. Another weakness is that the company does not provide quality customer service to the clients. The company has also migrated some of its services to E-commerce which leaves the customer less satisfied by seeing and not touching the real thing. The company also has to deal with the problem of producing at low costs while maintaining quality Opportunities The first opportunity for the company is capitalize on producing sustainable products which will attract more customers from the green movement. The other opportunity is expanding its global reach by creating new markets in Asia and Middle East. It can also target high end customers by introducing new and more expensive products for this market. This will increase revenue for the company. The company should take advantage of E-commerce to achieve more growth by giving online home furniture tips and provide better customer service (Vargo & Lusch 2004, p. 5). The other opportunity is to use renewable energy, use sustainable materials in production and participate in corporate social responsibility. Threats The first threat to the existence of the company relates to regulatory authority across different region. They may influence negatively the use of resources by the company. The other threat is that other small retailers have also reduced the prices of their furniture products which will affect the profitability of IKEA. The threat of raising cost of living due to the slowdown in economic activity has reduced the income of the customers. This will definitely affect how the business performs in the United States and Europe. Marketing objectives The marketing objective of IKEA relates to the thing that the company should take advantage of to retain its competitive advantage. The objectives also show what the company should avoid to remain competitive. The strategic marketing objective for IKEA includes market penetration especially online marketing to attract 30 percent more customers online. The firm will also strive to increase customer experience to the customers by improving customer care. The other objective of IKEA is to be more innovative in product development to reduce carbon footprint by 20 percent in 2011 to attract more customers who are environmental conscious. The company will look for new markets for its products as another market objective. List of references Armstrong, G. & Kotler, P 2006. Marketing: an introduction, Pearson Education, Inc. New Jersey, NJ. Daniels, C 2004, ‘Create IKEA, Make Millions, Take Bus’, Fortune, vol. 149, no. 9, p. 44. Edvardsson, B & Edquist, B 2002, ‘The IKEA Saga: How Service Culture Drives Service Strategy’, The Service Industries Journal, vol. 22, no. 4, p. 153-186. Howell, D 2006, ‘IKEA ‘Leeds’ The Way’, Chain Store Age, Vol. 82, no.13, p. 101-102. Kippenberger, T 1997, ‘The Story of IKEA’, The Antidote, vol. 2, no. 5, p. 33-34. Kling, K & Goteman, I 2003, ‘IKEA CEO Anders Dahlvig on international growth and IKEA’s unique corporate culture and brand identity’, Academy of Management Executive, Vol. 17, no. 1, p. 31-37. Vargo, SL & Lusch, RF 2004, ‘Evolving to a new dominant logic of marketing’, The journal of marketing, Vol. 68, No. 1, p. 1-17. Read More