Arvin Camacho, Michelle Isaac, Norwilyne Garcia, Jason QueMM230 - Marketing Management

University of the PhilippinesProf. Mita Angela M. Dimalanta

COMPANY PROFILE:

IKEA is a multinational group of companies that designs and

sells ready-to-assemble furniture (such as beds, chairs and

desks), appliances and home accessories.

COMPANY VISION:

To create a better everyday life for the many people.

VALUE PROPOSITION:

A leading-edge Scandinavian design at extremely low prices

COMPANY POSITION:

The company, which initially sold pens, Christmas cards, and seeds from a shed on Kamprad’s family farm, eventually grew into a retail titan in home furnishings and a global cultural phenomenon, what BusinessWeek called a “one-stop sanctuary for coolness” and “the quintessential cult brand.” IKEA inspires remarkable levels of interest and devotion from its customers. In 2008, 500 million visitors walked through IKEA stores, which are located all over the world. Now, IKEA has evolved into the largest furniture retailer in the world with approximately 300 stores in 38 countries and revenues topping €21.5 billion in 2009. Top countries in terms of sales include Germany, 16 %; United States, 11 %; France, 10 %; United Kingdom, 7 %; and Italy, 7 %.

1943 - IKEA is founded by Ingvar Kamprad

When Ingvar Kamprad is 17, his father gives him money as a reward for succeeding in his studies. He uses it to establish his own business. The name IKEA is formed from the founder's initials (I.K.) plus the first letters of Elmtaryd (E) and Agunnaryd (A), the farm and village where he grew up. IKEA originally sells pens, wallets, picture frames, table runners, watches, jewellery and nylon stockings - meeting needs with products at reduced prices.

1945 - The first IKEA advertisements appear

Ingvar Kamprad's business outgrows his ability to make individual sales calls, so he begins advertising in local newspapers and operating a makeshift mail-order service. He uses the local milk van to deliver products to the nearby train station.

COMPANY HISTORY:

1948 - Furniture is introduced into the IKEA range Furniture is produced by local manufacturers in forests close to Ingvar Kamprad's home. Response is positive and the line expands.

1951 - The first IKEA catalogue is published IKEA founder sees the opportunity to sell furniture on a larger scale using a catalogue. The IKEA catalogue that we know today is born.

COMPANY HISTORY:

COMPANY HISTORY:

1953 - Furniture showroom opens in Älmhult, Sweden For the first time customers can see and touch IKEA home furnishings before ordering them. The showroom is born out of a price war with a main competitor of IKEA. As both companies lowered prices, quality was threatened. By opening the showroom, IKEA clearly demonstrates the function and quality of its low-price products. The innovation is a success; people wisely choose the products with the best value for money.

1956 - Designing furniture for flat packs and self-assembly Decision for IKEA to design its own furniture stems, ironically from competitors pressure for suppliers to boycott IKEA. Exploration of flat packaging begins when one of the first IKEA co-workers removes the legs of the LÖVET table so that it will fit into a car and avoid damage during transit. After this discovery flat packs and self assembly become part of the concept.

COMPANY HISTORY:

1958 - The first IKEA store opens in Sweden The first IKEA store in Älmhult has 6,700 square metres of home furnishings! At the time, it is the largest furniture display in Scandinavia. Gillis Lundgren designs the TORE drawer unitWhile visiting an IKEA kitchen manufacturer, one of the earliest co-workers at IKEA, Gillis Lundgren, notes simple, practical storage ideas being used in IKEA kitchens and is inspired to apply the same thinking throughout the home. As soon as he gets back to Älmhult he sits down and designs the TORE drawer unit.

1960s - present Continuous growth of IKEA. A lot of achievements and furniture is made and distributed in different IKEA stores.

IKEA evolves into the largest furniture retailer in the world with 300 stores in 38 countries and revenues topping €21.5 billion in 2009. Top countries in terms of sales include Germany, 16 %; United States, 11 %; France, 10 %; United Kingdom, 7 %; and Italy, 7 %.

COMPANY STRATEGY:

Its mission of providing value is predicated on founder Kamprad’s statement that “People have very thin wallets. We should take care of their interests.” IKEA adheres to this philosophy by reducing prices across its products by 2 % to 3 % annually. IKEA is able to offer low prices in part because most items come boxed and require the customer to completely assemble them at home.

IKEA sources its products from multiple companies all over the world rather than a handful of suppliers as many furniture retailers do. This ensures lowest price possible, and savings that are passed on to the consumer.

IKEA’s stores are located a good distance from most city centers, which helps keep land costs down and taxes low. They save energy with low-wattage light bulbs and have unusually long hours of operation; some are 24-hour stores.

The floor plan is designed in a one-way format, so consumer experiences entire store first, then can grab a shopping cart, visit the warehouse, and pick up the desired items in a flat box.

1. What are things IKEA is doing right to reach consumers in different markets? In order to reach consumers in different markets, they consider the capacity of clients to buy their products that is why they offer products at a very low price. Because of IKEA’s “flat-box” concept, it would be easier for the clients to carry the furniture they buy. IKEA caters to different local tastes and preferences of customers in different places. IKEA studies its environment and offers its products in a way that would catch the attention of its clients in that specific area.

IKEA‘s marketing stimuli prompts consumers to buy their products, their strong points being their products, services, and price. Customers assemble furniture, which could be mixed and matched, making it customizable and better suited for the buyer’s preference. IKEA designs its products to suit the needs and wants of consumers in different local markets.

IKEA’s products are affordable in comparison to their competitors. Even with their low prices, the products are still designed to be attractive earning its label as the "quintessential cult brand" as coined by BusinessWeek.

1. What are things IKEA is doing right to reach consumers in different markets? IKEA – furniture bargain priced and built for small living spaces. IKEA offers an “As-Is” section where customers may opt to purchase damaged furniture for even lower prices.

Their move to improve product sustainability improves the motivation of consumers to purchase from them. By manufacturing with renewable materials and skipping the use of chemicals such as formaldehyde, customer safety concerns lead to actual purchase.

What else could IKEA be doing? IKEA had to change their model of operation, giving greater ownership to its US subsidiary, to become polycentric.

Researching the needs of their customers. By shifting their view of the home and what the customer needs for a certain room, they are able to tweak their furniture designs to enable integration of customer activities.

“Inspiring small changes” entails integrating the furniture into the natural flow of activity within a certain room to allow for smarter and more efficient living.

Researches to improve day-to-day living such as targeting certain time with increased periods of stress and introducing furniture specifically to find a solution for it.

Take up environmental responsibility by creating the goal of converting to renewable or recycled materials by the end of 2017.

2. IKEA changed the way people shop for furniture. Discuss pros and cons of this strategy.

PROS CONS

1. IKEA offers one stop shopping experience 1. Location of IKEA stores might be too far for clients who have busy schedules

2. Products are very affordable 2. Furniture is not built to last a lifetime

3. Furniture bought are easy to assemble and ship 3. It might be too much of a hassle for clients going through a one-way format, if clients know specifically what to buy.

4. IKEA has wide sourcing capabilities, which helps them save a lot.

4. Assembling furniture maybe unappealing to certain groups of consumers

5. IKEA lets clients experience the store first which can help clients decide on more items to purchase.

5. No shipping policy may be a burden to those customers who have no vehicles

2. IKEA changed the way people shop for furniture. Discuss the pros and cons of this strategy.

PROS CONS

6. Appealing shopping experience 6. DIY (Do It Yourself) assembly can lead to safety hazards especially for start up families with growing kids. Dressers and drawers have the tendency to tip-over unless safely secured to walls.

7. Friendly atmosphere/ store-layout

8. Store has available facilities: restaurant and day care center

References: Inter-IKEA Systems B.V.2015. IKEA History. Retrieved from http://www.ikea.com/ms/en_AU/about_ikea/the_ikea_way/history/1940_1950.html on 03 October 2016

http://furniture.about.com/od/buyingfurniture/fr/Ikea-Furniture-Review.htm

http://www.ikea.com/ie/en/this-is-ikea/democratic-design-en-ie/

https://www.theguardian.com/business/2015/jul/23/ikea-safety-alert-after-two-children-killed-by-falling-chest-of-drawers