IndexSWOT AnalysisMarketing StrategyThe 4Ps of MarketingOrganizationRecommendationsWorks CitedIn 1943, IKEA was created in Sweden by Ingvar Kamprad at the age of 17, the word IKEA was an acronym of his name with his name and surname initials, the name of his family's farm which was Elmtaryd and the nearby village called Agunnaryd (Page 572). Kamprad predicted that there would be an increase in consumerism in the context of the post-war reconstruction boom, so he moved quickly to provide low-cost furniture for families through the convenience of catalog sales (p. 572). In 1947, IKEA published its first original mail-order catalogue, in which the newly invented ballpoint pen was added to the assortment of products offered by Kamprad. Then, in 1950, Kamprad laid the foundation for IKEA's future direction by adding furniture and home furnishings to the mail order line. A year later, an expanded version of the IKEA catalog became available. In 1952, the stability of home furniture in the IKEA product line was strengthened when Kamprad took his items to the St. Eric fair in Stockholm and won over customers with the high-quality, low-priced furniture in his line (“Welcome Inside Our Company"). In 1953, IKEA opened the company's first showroom which demonstrated how Kamprad created a model of vertical integration, uniting a variety of suppliers under the IKEA umbrella, coordinating long-term production programs, and controlling distribution. In 1955, an IKEA employee discovered the company's “flat-box” approach of selling furniture flat-packed (p. 572). In 1964, the introduction of the first warehouse allowed IKEA to eliminate an entire phase in product distribution by allowing customers to collect containers from the warehouse (page 572). Practical solutions and a promise of low cost have created a new formula for IKEA of “detachable” furniture, flat box storage and shipping, and assembly by consumers armed with tools and visual instructions developed by IKEA. This formula allowed families to save money and create a new furnishing experience. IKEA revolutionized the home furnishings industry. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original EssayCurrently, IKEA is a limited liability company owned by an organization controlled by the Kamprad family. It has grown to become one of the largest furniture retailers globally working with over 1,500 suppliers worldwide i.e. around 50 countries designing their own furniture and trading internationally, they have 341 stores in 38 countries including: Germany , United States United States, France, Italy, United Kingdom, Sweden, Spain, Canada, Russia, China and others. IKEA's business vision is to "offer a wide range of functional, well-designed home furnishing products at prices so low that as many people as possible can afford them" ("Welcome to our company"). Their vision is "to create a better everyday life for many people. Our business idea supports this vision by offering a wide range of well-designed and functional home furnishing products at prices so low that as many people as possible will be able to afford them" ( “Welcome to our company”). IKEA guides the company in every aspect of our business, from the concept of design and production, to the stores, to the customers and beyond. They work hard as a team to offer quality products at affordable prices for our customers. This involves optimizing the entire value chain, building long-term relationships with suppliers,investing in new technologies, creating efficient manufacturing techniques and producing large volumes “Our vision goes beyond home furnishings – we want to create a better day for everyone touched by our business” (Y15 Annual Summary , 2015). For 30 years, Mikael Ohlsson was the president of the company who was replaced by Peter Agnefjall in 2013, he states that "One of the main reasons why I joined IKEA is that it is a truly based company on the values ​​that want to have a positive impact on people and communities. That's why sustainability is an integral part of everything we do. Sustainability should not be a luxury but accessible to many people” (“Peter Agnefjäll…”, 2013). IKEA sells good quality designer furniture, bathroom, kitchen and accessories at low prices all over the world. IKEA says that “by quickly responding to our customers' dreams and needs for a better life at home, we will continue to grow our business. We still have a lot to learn about our customers, so we constantly challenge ourselves to be even more relevant by creating high-quality, affordable home furnishings and making long-term investments in our business, people and planet” (FY15 Annual Summary, 2015). The new IKEA store formats and services make it easier for customers to visit IKEA via public transport, pick up products close to home or have them delivered so they are accessible to people whenever and wherever they want. Because IKEA wants to have a positive impact on the planet, it wants to produce as much energy from renewable sources, so it has invested in wind farms and solar panels to generate energy that does not come from fossil fuels. Their entire lighting range is LED, which is good news for the planet and customers' wallets, because LED bulbs use up to 85% less energy than traditional incandescent bulbs and last up to at 20 years old. All cotton used in products, from soft furnishings and bed linen to towels and rugs, now comes from more sustainable sources and we reached our target of sourcing 50% of our wood from more sustainable sources two years earlier than expected. Constantly offers more products and services that help customers save energy, water and waste at home (FY15 Annual Summary, 2015) IKEA's strategy is to provide a wide range of well-designed home furnishing items with quality excellent durability and durability, at prices so low that most people can afford to purchase these items. The innovation strategy consisted of designing furniture that was easy and cheap to build, receiving it disassembled in stores and displaying it in the showroom with detailed explanatory labels, making the intervention of a seller superfluous. This is one of the main reasons why customers tend to spend more time in the store than they would at a competitor's location. The company has made sure to stand out from the competition through the way it organizes its stores. For example, shopping at IKEA is an experience because they are designed for browsing. The furniture has been arranged and displayed in the stores as if it were in a home, but employees are always available for questions. IKEA identifies its customers as half producers and half consumers because most of the products need to be self-assembled and they also have the ability to choose, order, collect and transport. Their business faces high volume because their products can be replaced. The degree of customer contact is very low, which is why they focus on low cost, while the competition will focus on higher costs due to lowvolume, high variety but high customer contact. IKEA has released a shopping app for iOS to complement its current catalog. The home screen displays a variety of offers that will capture the attention of consumers using the application. It is very easy to use, people can simply tap on items to view more details and search for other products by area, which makes navigation very simple. When they tap on an item, they can see the item's availability by location and it will tell you exactly where the item is in the store by aisle. IKEA focuses on three goals when trying to measure their performance, namely quality, speed, reliability, flexibility and cost. The company wants to gain a quality advantage over the competition by doing everything necessary to do it right. The products are tailor made to the exact needs of their customers. The stores themselves are designed with a unique and clean layout, which matches the brand identity. Customers perceive products and services as having very high value. They also achieve speed by doing things quickly. Customers can quickly locate the store thanks to the bright yellow and blue identity. The shop is equipped with a warehouse and parking, which allows customers to park their cars without wasting time finding parking nearby. They also have support facilities such as nurseries and self-service restaurants, which allow customers to also leave their children in the play area so they can concentrate on their purchases. Products are packaged in flat packs with code numbers that help customers easily pick up what they need from the warehouse. IKEA also has a large conveyor belt with ramps that carries items through the checkout, allowing customers to complete checkout as quickly as possible. The company also strives to get things done on time. An example would be the reorder system that keeps up with out-of-stock goods and ensures they are kept to a minimum. IKEA does its best to expedite the arrival of new stock in case of stock out and reorder quantities in case the model of beers changes. Furthermore, they achieve reasonable waiting times and ensure the constant availability of the items. The operation of IKEA allows flexibility of products and services as they have the ability to introduce new products and services. They are more responsive to customer wants and needs through global sourcing strategy. The company leaves much of the design to its suppliers and is advantageous for the rapid introduction of new products. IKEA also allows mixed flexibility and is able to provide a wide range of products and services. The range of products is wide, from home furniture to office furniture and accessories, from childcare to self-service catering. The mix and match idea is successful in offering flexibility in the mix. The company is able to change its level of output. In stores, it is up to individual store management teams to determine stock levels of each product, meaning they are more responsive to changing demand in that specific location. IKEA also has a specific cost objective, which is to do things at the lowest possible cost. High quality reduces the cost and time needed to redo things. Quick operations reduce inventory and improve customer flow, which helps increase sales. Company reliability increases predictability and efficiency. Additionally, the company's flexibility allows them to adapt to change and adapt operations to meet needs and wantsof customers at no additional cost. In this sector the threat of new competitors is very high. There are almost no barriers to entry, but competition is very intense for new entrants. To compete effectively, competitors must invest large sums, develop long-standing relationships with customers, and select suitable locations for outlets. It is very difficult to establish in big cities and gain the reputation of IKEA, creating a large supply chain and creating a unique brand. IKEA has managed to manage and maintain long and consolidated relationships with current suppliers. It is recorded that they have at least 1300 suppliers in 54 countries and 21% of them are located in China. IKEA also has its own manufacturing company, called Swedwood Manufacturer and used to develop its own designs. Suppliers in this situation have very low bargaining power and may be forced to be on equal terms with IKEA rather than against them for any reason. There are many direct competitors who also import from China, which is why consumers are faced with many alternatives and very large bargaining power. IKEA needs to update the latest trends to avoid losing its name in terms of style. They are able to follow any new style quite well and quickly thanks to the simplicity of the design and innovative technology. Demand for basic furniture has remained relatively constant, making it very difficult for substitutes to take over. The industry is very competitive, which is why IKEA has wisely attempted to compete by entering the Chinese and Japanese markets and will allow them to gain a competitive advantage (Perepu, 2008). IKEA faces many political factors such as government attitude towards the brand and political policies stability. In 2012, IKEA had to admit that the company used prison labor in East Germany in the 1970s and 1980s to produce its products. Although they offered a formal public apology, the incident caused a huge controversy. There were accusations that the founder, Ingvar Kamprad, was an active member of the Nazis, which led to controversy with negative effects on the brand's image. IKEA has also received negative attention over its doll called Lufsig, which is Swedish for clumsy. But translated into Cantonese dialect it sounds very similar to an offensive term. In 2013, an incident occurred where a protester threw a Lufsig toy at the chief executive of Hong Kong, causing the toy to gain a symbolic role among Cantonese dissatisfied with the Hong Kong government. The macroeconomic situation and the spending power of consumers are two main economic factors that influence the situation. performance of IKEA and performance of any commercial entity. The global economic and financial crisis that occurred in 2007-2009 is a great example of the impact of external economic factors affecting the company. IKEA had to eliminate around 5,000 jobs, sales volume fell by 1% in the second quarter of 2009. The company is also directly affected by fluctuations in exchange rates between Europe and the United States and other major currencies at due to the global scale of business operations. . Other factors include interest rates, tax rates, the level of unemployment and fluctuations in raw material costs. There are social factors that have direct and indirect effects on IKEA. Increasing concern about environmental issues in society threatens IKEA's long-term growth prospects, which will see people increasingly concerned with issues of deforestation, water depletion and global warming. The company is oneof the largest wood consumers in the world and this could damage the brand image due to the social change associated with attention to environmental problems. Another issue may be the shift to online programs and applications to complete a wide range of personal and professional tasks. Fewer consumers may switch to electronic versions of books, which will decrease shelf demand. Other social factors that can strongly influence IKEA are demographic changes, changes in consumer attitudes and opinions towards furniture and appliances, media perceptions of the brand, and the health and well-being of the target customer segment. IKEA's competition is mainly local retailers, who try to copy the idea or counterfeit the goods that IKEA can provide. In the United States, the company faces competition from Target, Ashley Furniture, Walmart, La-Z-Boy, JCPenney and Ethan Allen. In the UK the competition would be Tesco, Next. In Sri Lanka, the main competitor would be Damro. Globally, Walmart would be considered the main competitor for style and functions, even if IKEA's prices are lower. Walmart is rated as less upscale than the products sold by IKEA. Ethan Allen caters to a more upscale market than IKEA's target market. IKEA has proven to be more successful in providing high quality at a lower price than its competitors (Jain, 2012). SWOT Analysis IKEA has many strengths as it is the largest furniture retailer in the world. Since IKEA is a global brand with a strong image, it is a great strength because everyone around the world is able to recognize them as a company. A great strength they have is that they are very sustainable with everything they do as a company and with the products and services they offer to customers. They are different from their competitors, which makes consumers want to buy their products even more. They offer a wide range of products that appeal to all target groups instead of addressing one target group, this is also an exceptional strength because not all companies are able to appeal to the mass market. Because they are able to offer a variety of products to a variety of people, they are able to produce many different products instead of having to limit themselves. One of the main pain points they encounter is not being easily accessible. IKEA stores are spread across the United States in only a few states, and when they are located in the state where a consumer lives, they have to travel far to get to IKEA. The stores are not offered everywhere due to the size of the warehouse and therefore it is easier for them to have only one location in one state. Another weak point is the consumer's perception of the cost/quality ratio. Consumers may not think that the quality of the product they want to purchase is worth what is offered or vice versa. If they think otherwise, then it's bad for IKEA too, because customers might think that if the price of the product is low, maybe the quality is also low. A big opportunity for IKEA is online sales because now that consumers are able to buy products online and have it delivered to them, it will generate more sales instead of relying on receiving sales from brick-and-mortar stores. Since stores are not easily accessible, it is more convenient for customers to buy online and get it delivered. The only problem is if the product does not appear or does not appear to be the same as the one online. In today's economy there is a greater demand for lower-priced products and more environmentally conscious companies, which gives IKEA the opportunity to gain even more sales because consumers nowadays are sensitive to prices and sustainability. TODue to the economic slowdown, traffic to IKEA stores has decreased. Even if they offer low prices, the prices may still be excessive for some consumers, especially in today's economy. Furniture may not be everyone's first priority right now, unless someone has purchased a new place to live. Even then, buying a place to live or moving was very expensive, so this may be another reason why store traffic dropped. The biggest threat to IKEA is the barriers to entry into certain profitable markets because they do not adapt to the cultures, needs or desires of other countries. This makes it difficult for IKEA to increase sales globally if it adapts quickly. Marketing strategy IKEA differentiates itself from competitors through cost leadership and shopping experience. To be a cost leader over competitors, IKEA surveys the competition to establish a benchmark and then sets its price 30-50% lower than competitors. Cost is so important that first a price is established, then the manufacturer, materials and design are chosen. They save consumers and themselves money in the long run. The shopping experience inside IKEA is not like that of any other company. The products they sell are displayed in room-like settings, so customers don't need a decorator to help them figure out how to put the pieces together. Customers would move along a predetermined path where they are guided through a maze of rooms by arrows placed on the ground. Their in-house Swedish restaurant is as famous as its furniture and allows consumers to use their products while eating at the restaurant. At the restaurant, IKEA uses its own plates, bowls, utensils, cups, etc. They also offer a special drink that only they offer in stores and that is made with cranberries. IKEA focuses on a couple of different factors when segmenting its market. The basic foundations of market segmentation they use are income level, age, family life cycle, lifestyles and benefits seeking. Since IKEA offers high quality products at an affordable price, they want to be able to appeal to all target markets. IKEA bases its store strategy on attracting low-income young people. College students and young adults, who tend to belong to the low-income category, are a large target market for IKEA because they are the people looking to purchase furniture for the first time. Since it is their first time buying furniture, they don't want to spend too much money because they don't know what will happen in the future. College students and young adults are looking for good, affordable furniture that works for the moment. The other major demographic that IKEA focuses on is the family lifecycle. New families need furniture to fill their new homes, but they don't have much money to do so because they've already spent most of it on the new home. IKEA products really cater to these types of young families well beyond their product selection and affordable prices. IKEA stores are also very child friendly, they have supervised play areas where parents can board their children so they can shop in peace while the children play, clean changing rooms are provided and offer a café where parents can bring children to eat something after shopping. The restaurant also offers a special menu just for children. The 4Ps of IKEA product marketing focuses on having a low price with high quality. Looking at competitor prices, “IKEA sets their prices lower30-50% compared to competitors" (Sonwane, 2014). The product is what attracts customers. They want customers to see high-quality materials. Therefore, they put furniture surfaces where they are visible. Customers see displays where they can touch, feel and sit on the furniture to get a good look at it. IKEA uses flat-packed boxes to make shopping easier, "flat-packed boxes to make it easier for consumers to transport furniture home and save on shipping costs" (Sonwane, 2014). They are able to transport these boxes by car or truck, saving money on shipping. IKEA promotes their products in all the countries where they are located. They change the language of the ads so that consumers are able to understand them. They use several IMC (integrated marketing communications) tools, including public relations, direct marketing, advertising, sales promotion and digital marketing. As part of public relations, they offer events within some stores such as buffets offered to families during holidays and also make use of the press. As part of direct marketing, they offer online and printed catalogs annually. The catalogs are produced in different editions and languages ​​and are printed on totally chlorine-free paper and contain at least 10-15% post-consumer waste. In advertising, they create print ads that are shown online and in stores, they also create video ads used for the Internet and TV. As part of sales promotion, they offer discounts and coupons that can be used in-store and online. In the digital advertising space, they use Facebook, Youtube, Twitter, Pinterest, Google+, Instagram and have an app that consumers can download and purchase from. IKEA distributes products nationally and internationally through digital and in-store distribution. Mattel has a presence worldwide, including North America, South America, Europe, Russia, Australia and Asia. For IKEA, distribution is about making the journey from manufacturer to customer as short as possible. They distribute their products in large volumes and in flat packages, which saves them and consumers money. As of 2015, 328 IKEA Group stores are located in 28 countries and there are 978 suppliers in 50 countries (Yearly Summary FY15, 2015). Organization The company's management strategy can be described as a flat box, “the organizational structure resembles the IKEA flat box, with only four layers separating the CEO and the cashier on the sales floor” (Griffin, 2016). An organizational structure flat box can also be described as a horizontal structure, “flatter structures are flexible and better able to adapt to changes” (Griffin, 2016). area or group” (Griffin, 2016). IKEA separates its team based on who has similar knowledge and skills to a particular skill. Figure 1 shows the four levels of IKEA coordination. Superiors are able to help and make decisions. A disadvantage of the flat box is the workload, “faster communication allows for quicker decisions, but managers may end up with a heavier workload” (Griffin). , 2016). Their supply chain starts with building with their own suppliers. IKEA is able to negotiate prices with suppliers like no other company. Since they are able to make deals that will positively affect the company, it becomes a long-term business relationship. With long-term business relationships come long-term contracts. “Asking the customer to select furniture and retrieve packages themselves is a management tactic.