Management of IKEA in the USA - Case Study Example

IKEA planned its operations in the three main regional markets of the Scandinavian countries, North America, and Asia-Pacific region. Within each of these three markets, there is a large commonality of tastes and preferences. Its large product range consists of a core set of standardized global products and a balance of region-specific items to supplement the overall business revenues. Thus in each market, it blended the reputed Scandinavian brand of products without ignoring the local needs.

IKEA carried forward its tradition of direct marketing through product catalogs to the current period, to communicate its offerings to the target market. The success of this can be gauged by the fact that the multi-edition, multi-language catalog circulation exceeds 110 million. In other words, it has effectively displayed its vast stores of materials to effectively create consumer interest.

Finally, IKEA actively pursued all avenues to offer quality products at the lowest possible prices. Global outsourcing, supply in knocked-down conditions to save on labor costs, self-service at the stores that act as mini-warehouses, etc. are some of the important facets of this low-pricing strategy. In the process, it made suppliers and customers strategic partners to its business concept.

            Thus IKEA’s success is a story of high-quality but low-priced products that are effectively reached the target markets, across cultural barriers. Its adaptations to the specific needs of the US and Canadian markets are fine-tuning the product offerings to suit local tastes and are not a change of its core concept.

2. Which features of the “young people of all ages’ are universal and can be exploited by a global/regional strategy?

             In these days of the Internet and globalized economies, market boundaries have disappeared and there is greatly increased awareness of the lifestyles and product preferences of people living in different parts of the world. The Internet is forty years old now and hence is already a tool in the hands of a vast population in the age range of teenagers to senior citizens, young at heart. This group of ‘young people of all ages’ has the characteristics of being ‘well-educated, white-collar workers, liberal in cultural outlook’ and does not necessarily carry the burden of vanity. In other words, they are cost-conscious and look for value for money in their spending habits. They have disposable incomes which they are prone to spend rather than save at the cost of foregoing a lifestyle that is seen as befitting their generation.

            Age is a crucial factor although even the not-so-young are also included in this group. Younger people are more adventurous while making buying decisions and are more attuned to global trends. They search for product information and make price comparisons with ease. The USA continues to be a major influence in global cultural trends and young people around the world are attracted to these trends easily.

            Global and regional marketing strategies should exploit the emerging market trends that are dictated by this group of ‘young people of ages’, keeping in mind their buying power, access to information, lifestyle trends, and decision-making abilities.

3. Is IKEA destined to succeed everywhere it cares to establish itself?

            On its way to being the world’s largest supplier of home furnishings during the past six decades, IKEA has seen success in its core concept as well as the need to make adaptations to insure its dominance. This means that there is no guarantee of success in all places unless there is flexibility in approach and adaptation to subtle local differences in tastes and preferences.

            The strategy of sourcing its materials from suppliers who can offer the advantages of low costs and logistics, organizing retail stores on the lines of mini-warehouses of semi-assembled/knocked-down parts, and involving customers in the transport and do-it-yourself style assembly work, etc. are likely to succeed in all the developed markets. In such markets, the labor costs are high and customers have the need for the do-it-yourself approach. However, some emerging markets like India or the Gulf countries do not prefer ex-stores supplies or home assembly work. Labor costs here are comparatively low and societies are accustomed to getting paid services at cheap rates hence IKEA's strategy needs to be partly revised for success.

Another major strategy of IKEA has been to be the biggest and best player in the market, although with the lowest prices. It is seen that it has so far concentrated in the relatively more affluent countries of North America, Europe, and the Asia-Pacific region successfully. When these markets are saturated, it needs to shift focus to other regions to maintain its growth targets. Some of these geographic regions will pose significantly different marketing challenges due to cultural differences and taste preferences, notwithstanding their younger generations. In such situations, IKEA may find that being the ‘biggest and the best’ strategy needs to be tempered with realizable goals.