the ikea case fnl

7/31/2019 The IKEA Case Fnl

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Abstract

The IKEA Group, one of the worlds top furniture retailers, has emerged as the fastest-growing

furniture retailer in the US. To become one of the leading furniture retailers in such huge and

promising market, it has set an ambitious goal to have 50 stores around the US by 2013. IKEA

has 4 branches in Los Angeles alone. From 1997 to 2001, the revenues of IKEA doubled from

$66 million to $1.27 billion in five years. Looking at the growth rate over the past decade, it

seems possible for IKEA to reach this goal. However, IKEA faced several challenges:

Americans mind-set, competition from established furniture retailer and different customers

preference. To address to these challenges, IKEA needs to apply market leader strategy

expanding total market size, defending and developing its market share to achieve this goal. .

Thus, brand awareness gives IKEA a great power in the US market. However, IKEAs motto is

low price with meaning. With meaning for US market is different from the other markets. If

IKEA cannot capture what US customers want, its offerings will become low price and no

meaning.


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Introduction

IKEA, the worlds largest furniture retailer was founded in 1943 by Kamprad. Its first showroom

was opened in Almhult and for the first time the customers could see and touch their furnishings

before ordering. By 2002, Ikea was the worlds most prominent furniture retailer. Though the

company was privately held and did not release profit figures, its 2002 revenues approached $12

billion. IKEAs product strategy is overseen by their product strategy council .the senior

managers of the product strategy council established priorities for IKEAS product line up. After

the product priority was established a product developer would set the products target retail

price using the company matrix. IKEA have separate matrix for each product type. They worked

with about 1800 suppliers in more than 50 countries. IKEAs target is to offer a wide range of

home furnishings with good design and function at low price that as many people will be able to

afford them. IKEA opened its first US store in Philadelphia in 1985 and capturing the US market

was not easy for them as because US market was quite different from other countries,

Symptoms

At the beginning Americans did not like IKEAs furniture.Americans were not willing to change their furniture frequently.American furniture market was highly competitive for IKEA on the basis of quality and

service

Americans consumers were used to with the home delivery service which IKEA neveroffered them.


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Identify the problemIKEAs furniture could not match with the American life style. Its beds and kitchen cabinets

were unfit for American sheets and appliances. Its sofas were too hard and uncomfortable for

Americans. Its product dimensions were in centimeters rather than inches and its kitchen ware

was too small for Americans serving size preferences.

American consumers are not willing to change their furniture frequently. So they prefer

durability of the furniture but IKEA is not that much conscious about durability as because their

main motto is low price with means.

IKEA did not offer home delivery despite that they prefer self service but American consumers

always prefer home delivery service.

American furniture market is highly competitive than other countries furniture market on the

basis of quality and service. The sales persons are also highly trained compared to the IKEA. So

capturing American market was not that much easy for IKEA.

Generate alternative solution:

IKEA must change the Americans attitude towards furniture as something fun and disposable,

furniture is something that add value to lifestyle without incurring too much cost.

IKEA has to compete not only in price, but also the value added services that these furniture

retailers offered as a package together with the furniture purchased.

IKEA originated in the Scandinavia has to modify its products to suit Americas furniture

market.


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To achieve the 2013 goal, IKEA should apply market leader strategy by expanding total market

size, defending and developing its market share. To expand total market size, IKEA should use

both new market segment and market penetration strategies. First, it should segment the market

to middle-upper class. This particular segment includes young, educated, high mobility home

makers that reside in sub-urban America. They are typically open minded and technology savvy

which suits IKEAs brand image and offerings.

IKEA should find new users, uses and increase usage volume of its current customers. To do so,

it should encourage and cultivate a new concept of furniture as representative of life style. As life

style changes furniture should change too.

IKEA should benchmark its products against hi-end furniture retailers in the US. It should also

avoid head-on competition against both high and low-end furniture retailers. Instead it should

position itself as a market leader in its niche market.

Analyze the alternative:

To retain customer first IKEA should follow the short term solution understanding the

consumers preferences and work accordingly.

To build a strong position in American market IKEA should follow the long term solution so that

IKEA can increase the number of loyal consumer and as well as to increase the profit amount.

Recommendation

To solve the problems, short term solution should be followed as because short term solution

will help IKEA to get customers attention and provide chance to prove themselves reliable to the

customers.


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Implementation

To protect and develop its market in America, IKEA should endure IKEA brand by maintaining

its company values and unique shopping culture at all stores such as keeping store design,

decoration, structure, service. In this case, it needs to modify the product matrix according to US

markets by maintaining the price range but increase number of styles that meet the needs and

wants of the target market. IKEA also needs to position itself by changing US consumers

mindset via various IKEA-consumer communication channels.

Conclusion

As mentioned in the case, Americas furniture market is very fragmented. In order to increase the

market share, IKEA needs to focus on positioning itself as the one stop centre for all home

furnishing needs. IKEA should target their marketing efforts on middle-upper, educated segment

of Americas population as they are the one that will be more open to accept new ideas and

concept that IKEA has to offer. Also IKEA should differentiate itself, focus on the experience it

offers to shopper, not just the low price products. By doing so, the goal of 50 stores in 2013 is

not far from reach.

the ikea case fnl

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