International Marketing - IKEA - Case Study Example

International marketing - IKEA Name Unit Class Contents Contents 2 Introduction 2 The vision and Mission of the Organization 3 Customer Analysis 5 SWOT Analysis 5 Internal 6 Strengths 6 Weakness 6 External 6 Opportunities 6 Threats 7 Impacts of SWOT analysis 7 Competitive positioning strategy 7 Market segment strategy 8 Conclusion 9 Introduction IKEA is a Swedish Multinational company that deals with design and sale of home furniture, appliances and other accessories. The furnishing retailer has grown to become a world leader in Do It Yourself (DIY) home furniture. Most of the company products are sold as flat pack where the consumer is responsible for assembly. The company range of products is 9,500 products. The customers can order their products online or through stores. The company was started in 1940s and grew to a multinational with more than 300 stores and presence in over 40 countries. The company has employed over 154,000 workers and had a sales turnover of 27.5 billion in 2012. At moment, the company has diversified their products and offers food and prefabricated housing on top of furniture (Hellström & Nilsson, 2011). This report will take a strategic analysis of IKEA focusing on customer, competitor, SWOT analysis and target market positioning. The vision and Mission of the Organization IKEA vision is to create a better everyday life for the many people. This has helped the company to put the interest of their customers at heart. The issue of sustainability has been one of the most areas looked at. This is due to rising public awareness on environment. Due to IKEA concern in making everyday life better, they have been involved in making better use of the resources and energy. The company have been able to reach the environmental sustainability target and reduced costs through environmental sustainability. The mission of the company is the same as vision. Through implementing their mission, the company have gained increased market share for their products. Creating a better life for the customers makes them achieve permanent customer base (Hellström & Nilsson, 2011). Competitor Analysis IKEA operates in a very competitive market sector. This is due to other low priced and good quality manufacturers. The main competitors for IKEA are British B&Q and The Home Depot. British B&Q have a trusted brand and offers classes on the do it yourself (DIY). They are also active in charity hence able to create a good reputation. This makes them a threat to IKEA in the Do It Yourself furniture market. They are also known to employ trade experts in a bid to capture more market. By looking at their market share, B&Q are still ahead of IKEA hence their presence in the market cannot be ignored. They have been able to attract new customers through free appointment with design consultants which have helped in making their brand trustworthy. British B&Q have been able to capture the Chinese market and become the largest dealer of DIY. B&Q is the fourth largest dealer of DIY and the second largest retailer of DIY in Europe (B & Q, 2007). Home Depot is the largest dealer in the Do It Yourself furniture globally. The company has been able to offer IKEA stiff competition due to their presence globally. Home Depot has been able to establish themselves across United States with their mega stores. At the moment, they have been able to outdo all the rivals in the American market to achieve the top position. Home Depot has also been able to win customers through their sustainability efforts and philanthropy. The company has invested in philanthropic efforts that have served several causes. (Home Depot, 2014).As with IKEA, the company has also been devoted to diversification of their products. This has been achieved through fuel centers which offer snacks, beer and providing trucks fuel. The competitors are increasing their stores worldwide hence creating a competitive market. This has made IKEA to look for ways in which it can reduce competition in the market. In order to do this, IKEA have analyzed the competitors’ activities. Cost leadership and design differentiation are the most used activities by the IKEA competitors. IKEA have used differentiation and enhancement of the customer experience in their stores. This has been achieved by understanding what the customers wants and working to achieve it. As with customers from competitors, they need unique designs and experts help in making home interiors. This has been done by IKEA in a bid to win the customers. The shopping experience at IKEA has been cited to give the company a competitive advantage (Hellström & Nilsson, 2011). Customer Analysis IKEA customers are low income earners, middle income earners and affluent group. This is due to their price ranges which cater for all classes. This leads to the company utilizing a pricing mechanism that will cater for the customers. Customers in the DIY furniture need designs that are unique and can easily match to their lifestyles. The customers also prefer having experts in performing their interior design at a low price. IKEA have been able to understand their customers’ needs and have worked in ensuring that they are able to cater for them. The company offers delivery and online services to their customers. There is also expert help for the customers when performing interior design (The IKEA concept, 2014). Customers in the DIY furniture sector are mostly attracted to products that offer dual use. This has led to the company to design products which have dual usage. Customers in the furniture stores are available throughout the year. This is due to the fact that furniture is required at any time. There have been many programs that have been used to enhance customer experience. These include after sale services and making sure that customers are given priority in the company activities (Hellström & Nilsson, 2011). SWOT Analysis Using SWOT analysis, a company can be able to evaluate its strength, weakness, opportunities and threats. Opportunities and threats are located in the external environment of the company. By working to improve the company weakness, it’s possible to transform them into strengths (Zentes, Morchett & Schramm-Klein, 2007). Internal Strengths IKEA have been able to use strategic practices through optimization of the raw materials which have led to reduced cost of manufacture. There have also been efforts to use recycled materials through setting up of recycling plants. Consumer experience has been enhanced through use of technology such as use of mobile phone applications (Hellström & Nilsson, 2011). IKEA have a strong brand image. The global image has made the company to target the customers more easily. The company has also been cited to be able to balance their products in terms of cost, functionality and quality. This has helped the company to achieve a competitive advantage. Weakness The company has been cited to lack appropriate communication with their customers and stakeholders. This has been due to their large scale operations globally. The company has also failed to increase their advertising campaigns. This has given competitors such as DFS a competitive edge (Zentes, Morchett & Schramm-Klein, 2007). External Opportunities There has been an increase in the buying trends of the DIY furniture stores. The customers of the DIY stores are mostly attracted to excellent services, pricing and quality which IKEA have offered. Environmental sustainability is another factor that has been on demand. IKEA can invest more in eco friendly products so as to expand their market. IKEA have been putting efforts to reduce carbon emission. This has been complemented with their improving relationship with the suppliers and customers. This can give the company a great competitive advantage and business prosperity through sustainability (Hellström & Nilsson, 2011). Threats There have been changes in the social trends which have threatened IKEA. There have been reduced numbers of new entrants into the housing market. Competition has also been increasing while there is low disposable income among the consumers. Global recession have an impact on the furniture market. This has affected IKEA in their sales following the financial crisis (Hellström & Nilsson, 2011). Impacts of SWOT analysis IKEA weakness has led to the competitors having a competitive advantage. There is need for IKEA to increase their advertising so that they can capture more customers. IKEA have to reform the value chain and also utilize innovation. This will enable the company to have a competitive edge and manage the threat of increasing competition. There is also need to ensure there is strategic development so that the company is able to raise the barrier for new entrants. There is also need to put more efforts on the opportunities (Hellström & Nilsson, 2011). Target Market Competitive positioning strategy The company has improved their competitive positioning strategy by working on their logistics. The company has a well defined logistics which have enabled them to manage more than 10,000 products. The products are manufactured by the company 2,000suppliers and are transported to the company stores and distribution centers. The company logistics department is credited with 25 percent of the jobs (Hellström & Nilsson, 2011). Another competitive positioning strategy used by the company is their organization. The company has presence in more than 38 countries and has 208 own stores. The rest of the stores are franchised by the company. The company also outsources their manufacturing which enables them to work on multiple activities. The company price is set in such a way that they cater for everyone. The customers include those staring families as well as students who are low income earners. The company has been able to balance their pricing giving them a competitive advantage (Hellström & Nilsson, 2011). IKEA have differentiated their products from the competitors. The company has been able to offer their customers variety of products. This has helped them in having a wide variety to choose from at an affordable price and good quality. Unlike their competitors, IKEA have taken initiative to take the customers children home. This has enabled them to win the customers heart (The IKEA concept, 2014). The shopping experience at IKEA is the best compared to the competitors. The company places their furniture in an organized manner in a house setting. The arrangement helps the customers in making informed decisions on their purchases. The company is also open late to ensure that they cater for those who spend most of time working up to odd hours (The IKEA concept, 2014). Market segment strategy The target market for IKEA is everybody; the company targets the affluent middle class and low income earners alike. To be able to cater for this market segment, the furniture retailer has used cost leadership strategy. The buyers are given limited service and low costs. The company designs the low cost ready to assemble furniture. The customers are expected to pick their products and cater for delivery. The company has tried to reduce their costs so that they do not charge high for their products. The company minimizes use of expensive wood to cater for consumer pricing. To be able to retain their cost leadership strategy, the company chooses their suppliers from a large pool. The design of the company products is made simple and functional. This helps the customers in ease of assembling and use of the products (De Wit & Meyer, 2005). The company focus on the target market enables it to have a competitive advantage. The company store is divided into three main parts. There is office, home storage and Children IKEA. The design helps in segmenting their customers as every part meets the customer segment requirement. The inclusion of the children segment helped the company to win heart of many customers (Hellström & Nilsson, 2011). Conclusion IKEA have succeeded as a global retailer in the DIY furniture. The company main strength has been due to their customer experience and pricing strategy. Through SWOT analysis, it has been possible to examine both internal and external environment of the company and look at the competitive environment. The analysis have been able to look at the proactive approach that the firm have taken in ensuring that they remain competitive in the market. Through strengthening its weakness, the company can be able to strength its brand more. The company has great opportunity if they can establish strong relationship with their customers. The company has also been able to segment the target market well which have enabled them to cater for everyone. The inclusion of the children segment has been a major boost in IKEA marketing. The company has been able to accomplish their mission of making a better life for everyone. From the analysis, IKEA is in a path that will make it a leading example in sustainable business. References B & Q (FIRM) 2007, You can do it: the complete B&Q step-by-step book of home improvement. London, Thames & Hudson. De Wit, B & Meyer, R 2005, Strategy Synthesis, London: Thomson Learning Hellström, D & Nilsson, F 2011, ‘Logistics-driven packaging innovation: a case study at IKEA’, International Journal of Retail & Distribution Management, Vol. 39, no. 9, pp.638 -657 Home Depot 2014, Home Page, Viewed 19 April 2014, http://www.homedepot.com/c/HomePageRegional4?s_tnt=56312:2:0 The IKEA concept, 2014, The IKEA concept, Viewed 19 April 2014, http://franchisor.ikea.com/concept.html Zentes, J., Morchett, D. & Schramm-Klein, H. 2007, Strategic Retail Management, Gabler, Wiesbaden. Read More