IKEA: (World’s largest furniture retailer)
VISION: ‘To create a better everyday life for many people’
ORIGIN: Sweden, 1953
AGENDA: Global Domination
TARGET MARKET: main consumers are classified as young, middle class, and upwardly
mobile, who prefer low-priced but trendy furniture and household products.
GLOBAL PRESENCE: Operates in 52 countries, 427 stores (as of 2019) with Germany being its
largest market (53 stores) followed by United States (50 stores)
What worked for them?
Product designs from Ikea are remarkably country neutral. Its simple,
straightforward design aesthetic works most anywhere, as proven by the majority
of its products that are consistent across international borders.
Global product-sourcing model for manufacturing which included buying
merchandise from around the world – not just the usual suspects in China and
India.
From the start adapted to machine production and thus cheap to assemble.
"We look at the competition, take their price, and then slash it in half" (Bloomberg,
2005)
Expansion of supply base to Vietnam where suppliers offers low-cost labor and
inexpensive raw materials, while IKEA provides the prospect of forging a long-
term, high-volume business relationship, and advice on locating the best and
cheapest raw materials, setting up and expanding factories.
Mastering new technology in furniture production, and effective advertising
methods.
Adapted to international markets, while remaining true to its business concept.
Thrives on cost-cutting by eliminating the need to own production facilities,
factories, and warehouses, since all manufacturing is outsourced to local
suppliers.
After facing challenges in meeting American consumer’s preferences (beds were
not long enough and did not fit American sheet sizes, bedroom wardrobes not
deep enough, kitchen cabinets did not fit US size appliances, sofas were too hard
and not big enough for American comfort, curtains were too short, product
dimensions were in centimetres rather than inches, and kitchenware was too
small for American serving-size preferences) IKEA localized products, found
modern, larger store locations, and outsourced goods from local lower-cost
suppliers.
IKEA has been allowed to exceed and expand its source of products in China,
thereby ignoring the usual sourcing guidelines. Producing goods locally to
substantially lower prices is key to IKEA’s success in China. technological
advancements by Chinese suppliers also contributes to low cost but equivalent
quality to traditional European suppliers.
IKEA customized showrooms according to Chinese living patterns and
standards. For example, many Chinese people live in small apartments with
balconies, therefore, IKEA added model sets and special balcony sections in the
stores to show how to furnish the balcony.
Japanese consumers were very “quality oriented” and traditionally viewed high
priced products as being of high quality. IKEA localized its modern designs to
include richer and darker wood products packaged in aesthetically pleasing
boxes, which are preferred by their Japanese clients, and customized
showrooms.
Ikea pursued a global expansion strategy of primarily entering countries going
through periods of high GDP growth (i.e. China, Eastern Europe) or those
developed countries with niches within the home furnishing industry (i.e. US,
Japan).
RECENT/LAST DEVELOPMENT(S):
IKEA formed its sustainability strategy named People and Planet Positive (2012) Under
which the company has taken following steps and initiatives.
For trimming down environmental damage. IKEA has tried to provide its
customers with more sustainable products. Sales from more sustainable products
accounts for €641 million of IKEA’s revenue. IKEA targets to achieve revenue of
€2.6 billion from sales of more sustainable products by 2020
IKEA targets to source its raw materials from more sustainable sources Against
their target of sourcing 50% of their wood requirements from more sustainable
sources by 2020
IKEA has targeted that all main materials used in their home furnishing products
will be either recyclable or recycled or renewable by 2020
COVID IMPACT:
Took immediate steps to improve the online experience for the customers and
introduced new services such as contactless deliveries. Made the decision to
gradually roll-out Click & Collect for curb side customer order pick-ups at select
stores.
