The Relative Impact of Marketing Research and Development - Term Paper Example

Executive Summary IKEA which performs in the furniture industry had developed a niche market for itself as following the policy of being a low cost provider along with the differentiator has helped to create demand for the products. The company while looking to build a pool of loyal customers have understood the external and internal environment and based on it designed a strategy which will help them in the long run. IKEA has understood the manner in which the external environment influences their working and have looked towards drafting strategies based on it. The internal analysis highlights that IKEA has worked upon their capabilities and resources and developed a generic strategy for themselves which is to be a differentiator and a cost leader. This strategy has helped to grow the business for IKEA and will be able to grow further by developing their business on similar lines. Further, IKEA has also ensured that they have identified the required resources through which the marketing objectives of the business are able to grow. Further, being able to ensure a program has ensured that IKEA is able to ensure strategies which will help them to grow over a longer period of time and will thereby ensure better returns for the stockholders. Table of Contents Introduction 3 Market Analysis 3 Environmental Analysis 4 Competitive Analysis 6 Customer Analysis 6 Internal Analysis 7 Marketing Objective 8 Target & Positioning 8 Marketing Mix 10 Competitive Advantage 12 Conclusion 12 References 13 Introduction IKEA has been working in the industry since 1943 and is one of the major furniture dealers in the world. Being in the business for such a long period has enabled them to have the largest chain of furniture stores in UK which deals in a variety of furniture, bathroom fittings, accessories and kitchen fittings” (Company Website, 2012). The company has followed a policy of differentiation and being the cost leader looks to provide quality furniture at the lowest possible rates. To ensure effective marketing the company has worked on loyalty programs, discounts and continuously innovating so that customers find something new every time they visit the stores. Market Analysis The market size of furniture industry is on a rise and is estimated to be growing by 50%. UK poses an opportunity for it as there has been an increase trend towards trendier furniture. The market size provides an exemplary example for growth and this is further substantiated from the life cycle chart. The furniture industry is in the growth phase which has resulted in increased growth for the products. This is witnessed through the life cycle graph below which shows growth for this segment (Wee, 2008). The widespread growth that the furniture market provides especially in UK makes the market very prone towards growth and will ensure that industry provides adequate return to the players (Czinkota & Ronkainen, 2004). Environmental Analysis This analysis will help to understand the manner in which the external environment has an influence on the working of IKEA Political IKEA has looked towards understanding the political situation of UK and based on it looked to develop a strategy (PESTEL Analysis, 2012). This is identified from the fact that IKEA has not looked towards India as the structure doesn’t allow foreign ownership of a single brand (Corporate News, 2010). IKEA has looked towards UK as the government is stable so that sufficient time is available for the policies to be effective. This has helped IKEA to develop their business well and being able to understand the political scenario and having a strategy accordingly has helped IKEA. Economic Economic situation of an economy has a huge role is defining the purchasing power of the people. A country which has a high disposable income and people are willing to spend more money on furniture and other luxury items are found to be attractive destination for IKEA (PESTEL Analysis, 2012). Along, with it IKEA has looked towards gauging the purchasing power of people based on the manner people purchase furniture and the frequency with which it is done (PESTEL Analysis, 2012). This has helped IKEA in identifying the potential customers better. IKEA has also looked to dwell on the tax aspect and looks towards tax subsidy and other benefits so that IKEA benefits and is able to conduct their business after understanding the economic scenario. Social IKEA has looked towards understanding this aspect properly and looks to provide furniture of different range and design based on the taste of the people. IKEA has looked towards understanding the customers profile and prefers customers who are outward and willing to change with time (PESTEL Analysis, 2012). This has made IKEA look towards countries where the population is rapidly growing and is changing as per the changing generations. Technological IKEA has looked into this factor seriously and based on the technological advancement of a country developed its supply chain. This has helped IKEA to ensure regular supply of raw materials and ensure that the products are readily available in the different markets (PESTEL Analysis, 2012). This has made IKEA use RFID technology which has ensured correct pricing and ensures similar pricing across all outlets. This has helped IKEA to ensure that they are consistent at the same time ensures that they work on the same business model everywhere. Environmental IKEA which is into manufacturing of furniture looks towards planting trees and saplings so that they are able to preserve the environment. The company ensures that it preserves and plants more trees than they use so that they can look after the environment (PESTEL Analysis, 2012). IKEA on this front have ensured that they contribute towards the society and have made it completely mandatory to ensure that their mechanism of working reflects care for the environment. Legal IKEA has looked towards adhering to the rules and regulations framed by the UJ government. This shows that IKEA adheres to the legal requirements. Further, IKEA has looked towards ensuring that the employees hired by them are as per the local requirements and the salary and time of working is determined as per the rules of the government (PESTEL Analysis, 2012). Competitive Analysis IKEA faces stiff competition from other players looking to the same segment of customers and having the same positioning. This is seen from the following chart Thus, IKEA faces stiff competition due to the similarity in the products and services being offered by all companies. Customer Analysis IKEA which looks to provide quality furniture at lower rates has ensured that they identify a market where they will be able to ensure efficiency and provide the customers with the requirements (Fletcher & Crawford, 2011). IKEA is aimed at people of all class and is aimed at people of all ages. This thereby helps to identify the target market as IKEA has thereby been able to ensure a target market based on the resources and the business model the company looks to follow. This has ensured efficiency and helped IKEA to function efficiently. Internal Analysis This analysis looks towards identifying the internal strengths and weakness and also the different opportunities and threats that IKEA faces. Since, it looks into the internal aspect of IKEA it will help the management in ensuring stronger reforms and norms. It is as Strengths Weakness Strong brand name as the company manufactures product under the banner Swedwood Limited advertising and marketing Self designing of the products has reduced duplicity Lack of pentration Strong distribution network due to long term association with the market Lack of consistency in quality Differentiator   Specialized service   Opportunities Threats Sourcig furniture from low cost providers like China Pressure from global players Using internet to ensure increased sales Falling disposable income Promoting themselves by highligthing that they look to conserve the environment Availability of substitute product made from other than wood Thus IKEA has looked towards working on different areas which has helped to strengthen its working pattern and will ensure growth for the business in the future. Marketing Objective The marketing objective of IKEA shall help to identify the strategies that need to be adopted by the company and throw light on its mechanism adopted to achieve the targeted objectives. (Krasnikov & Jayachandran, 2008) IKEA current strategy of low cost outlets mainly aims at targeting the lower section of the customer pyramid which constitutes a larger section of the society’s population. IKEA recently has developed products targeting the middle section of the customer pyramid. (Luther, 2011) IKEA is looking forward for the franchise agreement to ensure availability of its products at all times in its targeted market and further increase its market The strategy developed by IKEA is both short and long term based and looks towards working on different areas so that IKEA is able to develop a framework which will help them to ensure that they are able to market their products in a manner that provides them maximum efficiency. Targeting & Positioning IKEA is looking towards positioning its products for people have a love for furniture and look towards trendier furniture. The company has looked towards identifying their strategy based on it so that they are able to position their products clearly in the mind of the consumer. This will help IKEA in targeting the correct customers and will also ensure that they are able to target the correct market. IKEA while looking towards positioning its products have identified various parameters and have looked towards enhancing customer satisfaction by delivering products which provide customer value for money (Bangs, 2002). This has helped to identify the market positioning based on different parameters as Geographic Countries where people look towards changing their furniture and look towards trendier products Demographics People looking towards purchasing furniture based on the requirements and look towards trendier products Social Economic status Aimed at all strata of the society where people and household are they have the required money to spend on new furniture Psychographics Continuous improvement by developing new products IKEA has thereby identified various parameters based on which the company has looked to identify their target market. The company in its endeavor should look towards launching their products for all the segment of the society as they have products matching the requirements of the customers accordingly. This has helped them to identify the target market as follows The manner in which IKEA has developed their marketing strategy which looks to satisfy customer belonging to the upper provided segment will be able to correctly target the customer and also ensure that they are able to position their product differently and able to cater to maximum people Marketing Mix This aspect of the marketing will help to understand the strategy which IKEA will follow to ensure that their services is accepted by the public and provides the required return which the company is looking for. Product IKEA deals in specially designed furniture which is trendier and looks towards targeting customers who have a taste and preference for specially designed furniture. This will help to attract people who love furniture as they will be able to experience something new. Also, the fact that the products are entirely new and don’t have a presence presently will look towards creating a different market space. It will also result in having special effects on the customer as they will be able to get better products which will help to magnify the manner in which the demand for the products changes and will thereby ensure maximum efficiency in the use of furniture. Price IKEA is looking towards pricing its furniture in such a manner that it is able to aim at different section of the society. The company has looked towards following a policy low level pricing so that all section of the customers are aimed at. For this purpose the price of the furniture will be relatively kept low. Having a low price will ensure that the lower section of society which looks towards purchasing trendier furniture are able to take advantage of it. The company also looks towards low pricing because of the fact that they are eyeing a niche market and since it is a specialized service so the pricing is justified accordingly. Also, the fact that the service is new of its kind and doesn’t have a presence will ensure better return. The different directions and manner in which the product will be provided to the customers requires low pricing as it will ensure that being able to target maximum viewership and at the same time ensure that the competition level is dealt in a proper manner. Also, the fact that the specialized services is aimed at all sections and people who have the required disposable income so pricing the services low is justified and will ensure an opportunity of growth for the furniture manufacturer. Place IKEA has its the product in UK because of the wide potential that the place presents. The prime reason for choosing UK is the manner in which the population has grown. This provides an opportunity for selling the products as the number of people purchasing new products in the country is increasing which will thereby result in more customers looking towards the products. UK has a fluctuating exchange rate and an economy where the government is stable and the policies of the government are implemented towards the growth of the economy. Further, having a stable government and growing infrastructure provides an opportunity for IKEA to ensure that their strategies and demand for the product is accepted which will help to ensure maximum penetration of the market (Czinkota & Ronkainen, 2004). This will help IKEA to ensure that they are able to develop the services in the most effective manner and having millions people visiting the stores each year will provide the opportunity that will help them to grow the business and ensure proper returns for the business. Promotion IKEA has laid special stress on marketing of the new products. This is vital as marketing the service aggressively will ensure that customers accept the products easily and will help to ensure maximum sales. On the promotion front IKEA looks towards using different media. The company looks to spend the same in different areas so that the benefits of different form of promotion are availed. The company looks towards advertisement, billboards, pamphlets and other form of advertising so that awareness about the product can be spent. Thus, IKEA has looked towards using media and ways to advertise their service so that customers become aware about the service and look towards spreading awareness about the product (Bangs, 2002). This will help IKEA and will result in increased sale and help the business to ensure proper growth and return in the future. Competitive Advantage IKEA has looked towards following a business model where they look towards supplying furniture at the lowest possible cost. This has ensured that they are able to create a niche market for their products and working on a strategy of being a low cost provider the company has been able to attract different section of the customers easily. Along with it IKEA has looked towards being a differentiator which has ensured they provide different type of furniture which is trendier and attractive. This has helped IKEA to conduct its business effectively and have ensured that the strategy followed by them provides the required return the company is looking for. Conclusion IKEA thereby have ensured that they are able to develop their strategy based on the environment and internal capabilities and resources. This has ensured that IKEA develops a generic strategy for the company which is of a low cost provider along with being the differentiator. This has helped IKEA in shaping the manner they perform and develop a generic strategy which will help them to grow their business in the long run. References Bangs, D. 2002. The market planning guide: creating a plan to successfully market your business, product, or service, Sixth Illustrated edition, Kaplan Publishing Company Website. 2012. IKEA. Retrieved on April 25, 2012 from http://www.ikea.com/ Czinkota, M.R. & Ronkainen, I. A. 2004. International Marketing, 7th edn. South-WesternPublishing:Australia. Corporate News. 2010. .IKEA shelves plan to enter India, New Delhi. Retrieved on April 24, 2012 from http://www.livemint.com/2009/06/11135721/IKEA-shelves-plan-to-enter-Ind.html Cateora, P.R. & Mary, C. G. & Graham, J.L. 2009. International Marketing, 14th edn. Irwin:McGraw-Hill Fletcher, R. and Crawford, H. 2011, International Marketing: An Asia-Pacific Perspective,PearsonAustralia. IKEA. 2012. A trusted name in home products. Retrieved on April 25, 2012 from http://www.swot-pest-porter.com/modules/info/index.php?content_id=54 Krasnikov, A. and Jayachandran, S. 2008. The relative impact of marketing, research and development, and operational capabilities on firms performance, Journal of Marketing, 72 (4) Luther, W. 2011. The Marketing Plan: How to Prepare and Implement It, Fourth edition, AMACOM Div American Mgmt Assn PESTEL Analysis. 2012. PESTEL Analysis of IKEA. Retrieved on February April 25, 2012 from http://www.businessteacher.org.uk/free-business-essays/free-pest-pestle-essay/ Wee, T. 2008. Life Cycle Analysis. Retrieved on April 25, 2012 from http://www.enviroliteracy.org/subcategory.php/334.html Read More