IKEA Case Study Analysis Example

Introduction

IKEA is a furniture company, well-known across the globe for its stylish and quality products. Over the years, the company has expanded and improved its operations in line with market demands. Configured around the company’s excellence in operations, IKEA has ensured that it themes every operation around different parameters that has allowed its rise and growth since 1943 (Ferrell & Hartline, 2014). The company was founded by a 17-year old and has risen to the top charts of the best furniture makers in the world (Ferrell & Hartline, 2014). The essay analyzes IKEA from different perspectives of its operating environment, marketing strategy, and what the future holds for the business. The company’s push to enter and have a footing in the United States market has been a challenge, but there is still an opportunity.

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SWOT Matrix for IKEA

Strengths

• Low-cost culture of IKEA
• Anti-bureaucratic corporate culture
• The do-it-yourself approach for clients
• A positive brand image
• Sustainability focus by business

Weaknesses

• Reduced convenience of the do-it-yourself method for some clients
• Limited customization of products
• A low budget on promotion
• A weak online support system

Opportunities

• Low cost and high quality fits the US economic conditions
• The convenience of shopping with IKEA attracts young consumers
• Heightened popularity and demand of sustainable and stylish products

Threats

• Intense competition from other players like BluDot.com and Furniture.com
• The shifting customer needs and preferences that may not favor IKEA
• Entering a market with mature preferences

The Presenting Problem or Opportunity

What should IKEA do to penetrate further in the United States market?

Alternative Solutions

IKEA’s problem is also its opportunity in the case study. The company has found it tough to penetrate the United States market over the years and become dominant. In its 2011 sales, only 14% of the revenue was generated from North America, including Canada and Mexico, among other smaller nations (Ferrell & Hartline, 2014). The company’s concept has not found great favor with the American population, hence considering changes. The IKEA Concept of low cost and high quality has failed to resonate completely with the American public.

IKEA should listen to the needs and demands of the American population and offer them products befitting their demands. The company should observe the trend of furniture companies in the United States and steal a few tricks that they could use. For instance, they could abandon the ‘do-it-yourself’ approach for the American market and help with the whole process for their American clients within the stores. Convenience has a price, and the business should be ready to pay it for market gains.

Over the next twelve months, IKEA should try and improve their sales in the United States. This could be achieved by adopting a business concept where a client is accompanied by an IKEA carpenter/technician to do the joinery after the parts have been purchased. The customers would feel a lesser burden of having to do all the joining work by themselves. Some have no skills to do the joinery and may end up destroying the parts in the process of joining them together. The target of gaining a competitive advantage against rivals in the American market must be accompanied by concessions.

Marketing Strategy

Target Market

Marketing is an integral part of any organization. At the cost which IKEA sells its products, the main target could be the middle-income earning citizens. These are people with a disposable salary and are ready to spend on such items as furniture. Statistics show that 52% of Americans live in middle-class households, with a median income of about $78,000 (Elkins, 2019). Therefore, the company could have 52% of Americans ready to purchase from them with a good strategy. Elkins (2019) argues that middle-income earners love branded items but cannot afford luxurious products. Therefore, the brand of IKEA would be appealing to them.

Marketing Mix

The marketing strategy works best when the organization can clearly organize its marketing mix. IKEA’s products are already distinctive, with the home-assembly concept creating their unique value proposition. IKEA has a wide range of furniture and home furnishings and could meet all demands of a fully furnished house (Ferrell & Hartline, 2014). The company is also flexible enough to offer different sizes of furniture and furnishings to meet the needs of a client. Their products are appropriately set for various markets. However, the concept of consumers assembling the pieces at home needs to be tweaked for the American market to fit in properly.

The company’s 38 stores in the United States may not be enough to meet market demands. For instance, in a vast state like California, even five stores may not be enough to get close to the target market. People usually prefer getting their products from a place that is easily accessible and convenient for them. Nobody would be willing to drive 100 miles to access an IKEA store. Therefore, nearness to consumers is fundamental. Other than the physical stores, IKEA can complement them with online stores that deliver products to consumer’s doorsteps.

There are various promotional activities that businesses use to market their products and services. IKEA has concentrated on product design, catalogs, advertising, and public relations/promotions as its primary marketing approaches (Ferrell & Hartline, 2014). However, the business needs to expand its promotional strategy. One of the firm’s witnesses, as indicated in the SWOT matrix, is the low budget on promotion. The company should increase advertising, publicity, sales promotion, public relations, and personal selling activities. Advertising should happen through mainstream media, social media, and celebrity endorsements. Sales promotion may be done through after-sales services like fixing parts for consumers at their homes. The wide range of options should be utilized simultaneously to reach as many clients as possible.

The company leverages its business position on the price of its products. With a global network of cheap and quality suppliers, the business has managed to offer low-cost products of the best quality in the market (Ferrell & Hartline, 2014). In that case, the company should continue ensuring that the prices of its products always offer the best value for money. It may not be the lowest at all times, but the matter that the client gets must resonate with the amount paid to the business.

External Environment

The external environment of business incorporates such factors beyond the control of management (López-Duarte & Vidal-Suárez, 2010). In the SWOT matrix, the threats and opportunities represent what the external environment has to offer. Americans are well known as luxury spenders, but the economic conditions after the economic recession could not allow such recklessness. Therefore, IKEA should take advantage of such a prevailing external factor to penetrate the market further.

The culture of people is significant when designing market strategies. The American people have a spending culture, which could be very important in any business positioning for IKEA (López-Duarte & Vidal-Suárez, 2010). If the business can design its market approach in a way that impresses the American public, they would have no problems spending money on products for IKEA. The process would help the business outwit competitors like Furniture.com and gain a competitive advantage in the market. The management of IKEA cannot influence the external environment; hence it must establish strategies that help the firm cope with the market (López-Duarte & Vidal-Suárez, 2010).

Evaluation of Proposed Solution

IKEA needs to measure and track the success of its established strategies for the United States market. If the process does not succeed, the administration should redraw its approach. The solution to the small market by IKEA in the USA is increasing physical presence and adjusting its concept to meet the American style. On that account, there should be set parameters against which the firm should compare its actual results after twelve months.

First, the firm should target to increase its stores by at least ten new ones in different states by the expiry of the period. Therefore, ten new stores in the United States, or more, would be a success of the new strategy to a reasonable degree. Second, the firm should plan to hire three technicians for every store in the United States, who would accompany clients who need joinery help to their homes. If 75% of the stores have such employees in twelve months, it would be a success. Third, the share of sales revenue generated from the United States alone should stand 15% after twelve months. If the company achieves about 13.5% of its revenue share from the USA, it would still be considered a success. All the parameters discussed above need to reach their intended targets for the whole strategy to be deemed successful.

Every business plans for the future and IKEA is no exception. The vast United States market provides an ideal chance for the business to get bigger and better. Customer satisfaction is the immediate desire for IKEA; in a United States market where tastes and preferences are very different. In the distant future, the business should incorporate further technology in its operations. IKEA can consider a system where products can be delivered, and the buyer is AI-guided on how to join them together. Further, the business can adopt an approach where the buyer gets a joinery illustration as soon as the order is made online. It would improve convenience, as well as the buyer’s experience.

Conclusion

IKEA has been in the trenches for seventy-seven years now. It has adjusted to the needs and demands of the market with the changing times. Accordingly, the business has colossal experience about how to handle different market situations. There are many opportunities available for IKEA, but they need to overcome the threats and internal weaknesses to embrace them. Through the strengths that IKEA has built over the years, they stand a good chance of establishing a foothold in the elusive US market. The marketing strategy must be designed, and environmental factors well-handled for success to be witnessed. The marketing strategy is fundamentally strategic for the overall plan of IKEA competing effectively in the United States.

References

Elkins, K. (2019). 52% of Americans are considered ‘middle class’—here’s how much money they earn. CNBC. https://www.cnbc.com/2019/09/21/how-much-money-the-american-middle-class-earns.html.

Ferrell, O., & Hartline, M. (2014). Marketing strategy: Text and Cases (6th ed.). Cengage Learning.

López-Duarte, C., & Vidal-Suárez, M. (2010). External uncertainty and entry mode choice: Cultural distance, political risk, and language diversity. International Business Review, 19(6), 575-588. https://doi.org/10.1016/j.ibusrev.2010.03.007