Case Review Ikea Invades America Marketing Essay

IKEA has effectively grown in the home fixtures retail market as a result of its most important school of thought of cost-leadership, wide selection of fashionable and useful products, and its own ability to keep up low costs and pass the savings onto the customer. In addition to this, IKEA has also executed some very important details into their overall corporate strategy that affects the shopping connection with the customer. They have reinforced their chic-style and sophisticated environment by offering premium foods in their stores (offering smoked salmon and other Swedish delicacies), implementing the option of a child day-care area making adults free to shop, and by concentrating on self-service shopping/self-guided trips through fully equipped staging areas.

In addition to the experience that customers consider as convenient and even fun, IKEA can attribute the success of their group to their perfectly balanced commercial strategy. They follow a particular process that allows them to design and deal the developing of medium to high quality (relative to price) furniture and also enables the unique shipping, distribution, screen and last point of deal of the products in an exceedingly methodical manner.

The overall success of the company comes from its technique to produce attractive yet simplistic designs that are produced from inexpensive yet sensibly well-constructed components. These unfinished products are then transported in a disassembled fashion (flat-packed), sold right to the customer in a warehouse type store, and then taken by the client to their home where the final assembly occurs - all in return for a cost that is 30-50% less costly than challengers.

What do you think of the business's product strategy and product range?

For the limited "niche" market that IKEA manages within, the business's product line is substantially larger than any of its competitors. This could come therefore of the overall flexibility of its products' designs. An individual product like a desk or a bookshelf can be determined and purchased as an element of a larger set or as a person product, however due to the interchangeable characteristics of the product lines, it might also be implemented in a way that complements another set of furnishings from another type of design place. This advantage permits the minimization of design costs. The benefits of the product strategy are obvious - increased expense cost savings that are translated into lower charges for the client, while still marketing your brand as a fashionable option for home furnishings - "Low Price with Meaning. " IKEA supplies the customer with the liberty to choose their own furniture, designs, and mixtures while providing them with as much assistance as they can to streamline the purchasing process. Through the showroom examples that display totally furnished home scenarios to the option of user-centered items such as tape-measures and vehicle cargo racks, IKEA is utilizing its self-service (for customers) school of thought.

Another good thing about the merchandise strategy comes from the understanding that is inherent between your customer and the manufacturer - the expenses are lower because they're simplistic, medium quality, convenience designs where assembly is required without exception. This flat-packed strategy will save on structure and transport space. The arrangement is dual-benefit because the consumer can see the cost savings of self-assembly. This balance between quality, product line and price happens through an extremely closely checked process. The cons of the product strategy and the product range are pretty apparent as well. The idea of the transient use of medium-quality, self-constructed, Scandinavian-styled furniture by natural means eliminates a large portion of the populace as a target market for the merchandise. Either the full total combination of the details or all of them individually potentially triggers concern among certain consumer demographics. The "niche" market where IKEA resides will not provide a sizeable product line for the ones that aren't looking for the overall type of furniture that they offer. In addition to this, the traditional western mentality regarding home furnishings is the one which IKEA hesitated in responding to. It conducted general market trends and found that its product line had not been aligned with traditional demand, especially due to the reluctance of Americans to adopt a "Scandinavian" design of home furnishings.

Despite its success, there are many disadvantages to shopping at IKEA. What are many of these downsides? IKEA's Eye-sight Statement (in Amount C of the case) describes the way the company seeks to create a "relationship" with its customers. What do you consider of this eyesight statement?

The disadvantages of shopping at IKEA are almost as intrinsic to the environment as the advantages. Due to the sheer size and layout of the stores, the ability for consumers to quickly locate and select a tiny quantity of products and vacate the premises is very hard. It appears that to keep a timely and effective "traffic circulation" the second level of the store is designed along a course that leads the consumers by having a display of all the different products throughout the distinct segments (kitchen, shower, bedroom, etc. ) For a consumer to locate the merchandise they are seeking, they could experience some difficulty navigating through IKEA's 10, 000 other products. In addition to this, the scarcity of store locations restricts the power of the buyer who is placing your order from a catalog to literally experience the product prior to get and delivery.

The vision affirmation is reasonable in its delivery, but probably flawed in its practicality and exactly how it pertains to IKEA. To start with, the company declares the need for a substitute to expensive furniture. They appear to make the claim that nothing you've seen prior has there been a corporation to provide this to the buyer, however, local furniture stores have been offering low-priced, fully assembled furniture before the introduction of IKEA. Furthermore, they claim that they are developing beautiful, durable furniture; these boasts cannot be quantified and are therefore merely a matter of impression. One consumer could experience IKEA furniture and regard it as the best design and creation initiative to get ever been executed in the home furnishing market; another could go through the very same furnishings and be completely aghast and appalled by the idea that these products were thought to be either beautiful or durable. In addition, they declare to be responding to the home-furnishing needs of these all around the globe; those who have different styles, tastes, and budgets. This is partially false because of the very nature of these marketing. They aren't responding to the average person needs of the world, somewhat they are handling the many home furnishing needs with the "Scandinavian-answer. " They are simply marketing their limited furniture blueprints, styles and designs so that they can convince their goal markets to improve the way they think about home furniture (ephemeral vs permanent, minimalist vs complex). They are simply professing to be the panacea for those who exist in a world without affordable, high-quality fixtures; they state to part with the public. They create a sense of class-warfare and claim that they can't complete their noble goal with no help of the consumer. So they propose this seemingly harmless bond between IKEA and customer, because evidently one of the very most profitable corporations in the world whom holds a few of the most powerful brand reputation ever, couldn't continue to offer low prices if they were required to build their own furniture. It appears slightly absurd when you dissect the advertising logically. There is absolutely no uncertainty that forcing the client to develop their own furniture translates into cost savings, but from what extent do the consumers actually get to enjoy those benefits? Nonetheless, they continue to lower prices and increase market show, so their strategy appears to be working very well.

The reality IKEA hope to have fifty stores in operation in the U. S by 2013 can be an indication of how optimistic the business is about the viability of its value proposition in this country. Do you consider IKEA has been overly positive in its growth plans? How would you improve IKEA's value proposition to make it even more appealing to American consumers?

IKEA will likely attain its goal of having fifty stores in operation in the U. S. by 2013. However, it'll be a challenging task to perform without applying significant changes to the overall approach IKEA has taken regarding the U. S. First, they have to perform general market trends regarding the purchasing developments of not only their current customer demographics, but moreover, the demographics of the clients they are not attracting. Secondly, they have to familiarize themselves with the specific and individual styles to which Us citizens are attracted. The ability to transpose the original (American) way of thinking regarding interior design with a more European (Scandinavian) based mostly fashion might not exactly be helpful for IKEA. Also, the products that IKEA offers are too limited in their usability in several regions of the united states. Just as different parts of the earth appreciate different styles, different parts of the U. S. do as well. The U. S. is exclusive that it encompasses all the different ethnicities of the world in a free market, the power of IKEA to convince every separate cultural group's individual personal preferences might not be realistic either.

The capacity for adaptive change would be the key to IKEA's continuing existence and success. It really is a "win-win" for every party engaged: If IKEA executes research to know what they need to change to reach your goals in the us they: a. ) will consistently attract their faithful customers with newer design produces, b. ) may capture new market sections of consumers that never considered IKEA an option (through advertising their improved and expanded products) and c. ) could recapture discouraged people that "tested" the products, but are no more considering the IKEA brand.

To achieve the kind of expansion that IKEA is longing for, should the company change its product strategy? If so, in what way(s)? How about its product range-are there limitations to the matrix strategy? If the company grow its product lineup to add a lot more styles and price items? In how many other ways should the company consider changing its product lineup?

It should expand its belief that the whole world can be convinced to simply accept the "Scandinavian design" is the widespread flavor in furniture. Most of all, they need to implement three progressive features to their business model (especially in U. S. market).

First they need to adopt a higher quality brand image of their limited products than they presently possess. Following a much needed development of their product line, they have to market the increased quality and widened selection. If they're going to improve the range of stores, then an expanded product line is important to achieve customers in these new geographic areas. They may have the image of simple, practical, stylish home furniture, however price can determine quality and certain consumers have a high aversion to companies that declare that their products are high-quality, however, not meant to last a long time; or that their products are beautiful and stylish, but cheap at the same time. These paradoxes are detrimental to the attainment of people that are in fact affluent.

Secondly, they have to adjust to the marketplace in which these are advertising. If they are functioning in Midwestern U. S. , then after executing market research they have to advertise the merchandise that appeal to that location's inhabitants the most. Third, they need to increase the option of services in their stores, such as delivery for those who cannot transport the number of furnishings they need to outfit their house, funding for large buys, and company assistance with the assembly of their products. All of these could be purchased at a premium if the consumer chooses to do so. The option of these offers could further get rid of the people that don't consider IKEA an option.

IKEA claims to market to the mainly low-middle income, young, metropolitan and suburban, informed, specialists - but at the same time they claim that their typical consumer is superior enough to understand fine wine beverage and fine food, participates in international travel using their frequent flier a long way, etc. This paradox is illogical in and of itself as well. The ability of a young, educated, low-income, urban dweller to spend their limited throw-away income on fine wine beverages, food, and international travel (even while doing this by saving money on the affordable, yet stylish home furnishings) is highly improbable. The much more likely scenario is that this image of the IKEA consumer is the representation that they wish to project in hopes of bringing in consumers who wanted to be looked at as this depiction as well. It is doubtful a successful individual with fashionable likes will spend their income on temporary, particle plank furniture. That is the exact carbon copy of considering a McDonald's stylish, urban dining because it is located in the guts of downtown in a metropolitan area.

If you'd to predict, what do you consider IKEA's value proposition and product lineup will look like in ten years?

IKEA will likely use the scale and strength of its company wisely to grow its products drastically, improve the availability of corporate and business offers in order to make its products even more achievable for the consumers, and will implement a vicinity school of thought to provide certain geographic areas with the styles the local population demands. It will also have a higher probability of implementing a massive marketing campaign so as to expose other potential marketplaces to its innovative and reliable designs prior to widening, thus increasing future demand in locations which could eventually receive an IKEA store. IKEA will most likely also continue its approach to making by using outsourced developing locations to avoid needless costs. IKEA has a high probability of making it through and prospering because of its differentiation/low-cost strategy.

Some industry observers have advised that IKEA should start lots of smaller, satellite tv stores across the United States (e. g. , in shopping malls, strip department stores, etc. ). By supplying a limited range of IKEA products, these "IKEA Lite" outlets would presumably give consumers who do not often have access to a full-size IKEA the possibility to go through the brand. In addition, consumers who do live near a full-size IKEA would be able to use these mini-outlets to make modest acquisitions (e. g. , purchase a set of mugs, instead of a whole living room arranged). Would you agree with this notion? Why or you will want to?

No, I don't believe that this is in the best interest of IKEA's overall commercial strategy. They have carved a niche in the home fixtures market by doing just what they have decided to be the far better manner of cost-reduction (predicated on market research). Smaller home furnishings can be obtained and purchased through their business-to-customer internet website through the company website. Usually, individuals are more comfortable purchasing small, inexpensive items online over large, costly items. If IKEA was to apply smaller IKEA-lite stores, they might then be competing with stores such as Foundation, Bathroom & Beyond and Pier 1. Their differentiation strategy of self-shopping and self-assembly would be rendered either unavailable or no more a competitive gain. Furthermore, the price incurred to operate and send small items to these satellite television stores would improve the overall costs of the things.

The success of IKEA comes from the cost savings of retailing large furniture to people that are prepared to assemble the merchandise themselves. The sale of smaller, tier 2 and tier 3 items such as bath towels, mugs and cups, and storage storage containers are profitable because of the fact that the buyer is in the key facility looking for large home items. The sales of supplementary items is open to complement the larger items. The implementation of smaller, IKEA-lite stores would not be recommended as it conflicts using their current commercial strategy and there is absolutely no discernible profit in changing the strategy at this time with time.

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