IKEA INVADES

AMERICA

Presented By
GROUP 7
Bhushan Jasani (20)
Shashanka Shekhar (54)
Abhijit Bhattacharjee (109)
Nartan Desai (114)
Swetapadma Mishra (138)

COMPANY BACKGROUND
Roots lie in Sweden where founder Ingvar
Kamprad grew
Passionate about developing a business since
childhood
By 17, he formed IKEA using the money his father
gave as gift in the year 1943
By 1951, Kamprad focused only on low-priced
furniture
By 1953, first furniture showroom and by 1955,
designed its own low-priced furniture
In 1965, opened its first flagship store in
Stockholm

COMPANY BACKGROUND
IKEA expanded into Europe and US
First US store in US in Philadelphia in 1985
It faced a big obstacle in consumer preference
It made some adjustments but the companys
hallmark distinctly Scandinavian design
remained constant
By 2002, it became the 3rd largest market in US

COMPANY BACKGROUND

THE 4Ps - Product

Low-priced furniture store
Scandinavian design and style furniture
Concept of flat packaging
Can be assembled and disassembled easily
Importance to quality of products
Variety of styles of furniture
10,000 other products like alarm clocks, trash
cans, cloth hangers

THE 4Ps - Price

Low price furniture concept
Flat packaging concept saved the price of
shipping
Good designs at a reasonable price which
reflected the companys slogan Low price
with meaning
Favored destination for price conscious
customers

THE 4Ps - Place

154 stores in 22 countries, 286 million
customers in a year by 2002
Whenever a new store opens, thousands of
shoppers line up the very first day
Started low price stores in Scandinavia
followed by Asia and North America
If a store is close to the consumer, it enhances
consumer perceived value

THE 4Ps - Promotion

Consumers visiting the stores themselves helps
them to get a broader view of the product
Lighted and inviting ambience
Customers are free to lounge on the model
furniture
Price tags put on the furniture which gives an
idea to the customers and plan their budget
accordingly
Stores resemble modern theme parks having
child care centers, restaurants etc
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SWOT Analysis
Strengths

Weaknesses

Furniture not build to last for

lifetime
Few Locations
Inability to deal with
competitors in earlier days
Assembling-not appealing to
everyone
Swedish designs may not
appeal to all

Strong Brand Image

Cheap and affordable
Easy to transport and ship
Strong global sourcing
Friendly atmosphere/Store
Layout
Wide range of products and
styles
In Store Facilities
One Stop shopping

Opportunities

Threats

Untapped Markets (Midwest,

B2B Selling)
Different types of stores
(high end and low end)
Use of e commerce for
promotions and sales
Advertisements to educate
people

Low end stores like WalMart,

CostCo
High End Storse like Ethan
Allen, Thomasville, Jordans
Furniture

CASE QUESTIONS

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1. What factors account for the success of IKEA?

. Strong appeal to price conscious Swedes
. Innovation and improved function at lower prices,
. Facilities like Child Care Center, Restaurant, Bank,
Parking for 1000 cars at its retail locations
. Product Strategy council
. Product Pricing (Matrix)
. 1800 suppliers in more than 50 countries ( Cost Benefit
Labour Vs Product Quality Standards)
. Large Volumes
. Save in every direction except ideas
. Customer as Partner
. Shopping experience at IKEA: provision of pencil, paper,
tape measure, store guide, catalog, shopping cart,
shopping bag, stroller
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 Leveraging the difference between

Low End Retailers (Wal Mart, Office Depot,
Costco)
High End Retailers Single Brand (Ethan Allen,
Thomasvill), Multiple Brand Retailers (Jordans
Furniture)
Market Research on Product Lineup and
Merchandising
High Profile advertising campaign designed to get
Americans to take a more Commitment Free
Approach to Furniture
Campaign called Unboring, Award Winning
commercial directed by Spike Jonz
1997-2002 $600 Million to $1.27 Billion
By 2002, US was 3rd largest market after Germany
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and Britain, 14 US Stores servicing close to 30

2. What do you think of the companys product strategy and the

product range?

IKEAs product strategy & product range is laid

out in a manner that is easy to read

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 A separate matrix for each type of product IKEA sold

eg. Sofas,
kitchen tables and so on
Matrix would pin point to market opportunities for
product markets
Mix/Match Different type of woods Achieve correct
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product/price

CDSTEP Analysis
Culture: Interior design is avery personal
andunique to the customer. IKEA creates pieces that
are simple and covers nearlyall forms offurniture.
IKEAs corporate culture is considered waste a
deadly sin at IKEA, and employees are on a first
name basis, despite seniority or position.
Demographic: The typical IKEA shopper is a person
who travels abroad, likes taking risks, likes fine food
and wine, has a frequent-flier plan, and is an early
adopter of consumer technologies.
Social: US consumers are unwilling to change
andreplace their furniture. Yet many have constantly
changing tastes to keep up with changing
designtrends.
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CDSTEP analysis
Technology: IKEA uses its flat packaging
technology as a competitive advantage to cut
costs.
Economic: During economic downturns, cheaper
retailers tend to flourish more.
Political/Legal: IKEA is based in Sweden

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Perceptual Mapping

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3. Despite its success, there are many

downsides to shopping at IKEA. Explain
some of them. Also IKEAs vision statement
describes how the company seeks to build a
partnership with its customers. What do
you think of this vision statement?
Furniture is not built to last a lifetime
Shoppers are responsible for
Transporting purchases
Assembling purchases
Store layout may be viewed as inconvenient
Relatively few store locations in US
May have to travel significant distance
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Coming to the vision part,

Low priced furniture
Manufacturing durable and beautiful furniture which
is merely a matter of opinion
Catering to home furnishing needs which is partially
not true as they cater to all the needs with the
Scandinavian style
Build a partnership with its customers
In order to preserve a long-lasting relationship, IKEA
must learn how to create the lovely furniture, keep
inexpensive price points, and constantly come up
with advanced ways to help the customer feel less
disconnected after purchasing a product
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4. Shall IKEA go with opening 50 new

stores ? Is IKEA being over optimistic ?
Yes
IKEA is not being overly optimistic in its growth
plan of opening fifty stores in the United States by
2013
Crate & Barrel have over 100 stores in the United
States (Crate and barrel careers, 2012)
To Stay at top-of-mind of consumers
To become accessible to everyone

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VALUE PROPOSTION

Stores interior design is welcoming

Self assembled products
More durable products
Access to daycare center and restaurants
Flat packaging cutting the cost of delivery to
homes

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Improvement in VALUE PROPOSTION

Design in line with taste of American Customer

To become more transparent
IKEA should focus on building trust
Being transparent with who their suppliers are,
where items are sourced, and the labor conditions
of its employees will give IKEA a competitive edge

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5(a). To achieve the kind of growth IKEA is

hoping for, should the company change its
product strategy? If so, in what ways? What
about its product range? Are there
limitations
to
the
matrix
approach
suggested in fig b?

Product Strategy:
Has shown great success
Effective for looking at a
snapshot
Different matrix for each
product type

Limitations:
Focus groups are semistructured or unstructured,
smaller size 8 to 12
Limited by the size of the
matrix
May miss certain gaps
Identified by IKEA council
members

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5(b). Should the company expand its product

lineup to include a greater number of styles and
price points? In what other ways should the
company consider changing its product line up?
Stick to your roots, but put your customers first!

The American Marketplace is different

Expanding product lines to include a broader customer
base
Adding more price points
Target low to middle income consumer
Adding in perks and services
Targeted at consumers who shop at high end retailer
Focus on creating a long term customer
Marketing Campaigns, IKEA Club
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THANK YOU

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