Marketing Essay – IKEA’s Audit and Objectives

IKEA Marketing Audit and Marketing Objectives

Introduction

IKEA is recognized as one of leading home furnishing company. Founded in 1943 by Ingvar Kamprad in Sweden, IKEA’s business idea has been to offer wide variety of functional and well designed home furnishings and accessories at low prices so that a majority of people can afford (IKEA, 2012). The vision of IKEA is to create a better everyday for the many people. The company’s marketing strategy is involving customers in delivering the best services and products possible in the market. For its quality, low cost and stylish furniture and home furnishings, the company has also built a reputation for itself across the globe (Baraldi, 2008). The IKEA group has about 351 stores in operation in 43 countries. The company is widely popular in Europe and is continually penetration into other countries. However, its penetration into the US furniture market has been hampered by several factors, most of which being beyond the company’s control (Hultman et al., 2012). This paper intends to present a marketing audit for the company and set marketing objectives that will enable it to perform well in the market.

Internal situation: Strengths and Weaknesses

This section intends to present the strong and weak aspects of IKEA. The purpose of this analysis is to give a company an overview of its competitive situation and helps in the decision making on the actions that will address the trends (Grant, 2010; The Times 100, 2012). A situational analysis can help management determine if there is need for strategic change. The strengths and weaknesses are discussed below.

Strengths

Low cost structure: Low prices and cost structure is the cornerstone of IKEAs business strategy as well the essence of its success (IKEA, 2011). Low cost measures have been ingrained into its corporate culture and the company is always looking for new and innovative ways of conducting its business in a cost effective and efficient way (William, 2009). This model also goes well with customers who appreciate this operating style. This low cost structure has enabled IKEA to continue being profitable even in harsh economic times and has given it an edge over competitors who are struggling. In order to boost sales in the harsh economy IKEA has continued to use various innovations to maintain its low cost structure without compromising customer value. Some of these business innovations include flat packaging and use of new materials (Edvardsson & Enquist, 2011).

Extensive Customer knowledge: IKEA has extensive customer knowledge that has given them a competitive edge over competitors (Edvardsson & Enquist, 2011). The company understands and uses various purchasing factors that influence customers to buy. The do it yourself approach not only lowers company costs but offers customers a different furniture shopping experience (William, 2009). The company offers a wide variety of products at low prices. Their stores and showrooms are designed with accessories like mats and carpets in a way that allows the customer to experience and picture the IKEA furniture as it would look in their houses. This model allows customers to shop without being bothered by sales people and is able to choose different accessories that come with the furniture (Ferrell, 2011). This is a unique shopping experience that leaves a customer with a feeling of accomplishment. IKEA also offers home delivery and assembly option for those not interested in the DIY approach.

Corporate culture: IKEA operations are guided by principles that value anti-bureaucracy and the protection of workers and environment. This culture is based on values such as cost consciousness, simplicity, respect and togetherness (Suppiah & Sandhu, 2011). The company believes greatly in keeping employees happy by promoting well being and job satisfaction. This work ethic and culture is the reason why IKEA is ranked as one of 100 best companies to work for (Ferrell, 2011).

Brand reputation and image: IKEA brand image is one of its key strengths. Most people around the globe readily recognize the blue and yellow logo as a representation of modern and trendy furniture. IKEAs brand strength is as a result of its wide variety of high quality products at a low cost (Tarnovskaya & de Chernatony, 2011). The company not only offers furniture but also furnishings and appliances for homes and business offices. The company has also introduced home building materials where customers can use reasonable priced and environmental friendly materials to build their IKEA home. The worldwide market presence and strong brand image and reputation have contributed to its hold on customers and market share (Jurevicious, 2013).

Added Amenities: In order to improve customer experiences, IKEA has several added amenities at its store. The company provided child care services which allow their parents more time to browse and purchase the furniture and accessories (Jurevicious, 2013). Some stores have in store restaurants that help in encouraging customers to stay longer and the sales from the restaurants contribute to company’s profits. They also offer rental cars for bulky purchases. Customers can also schedule consultation with designers who offer professional advice. All this is designed to make the stores customer friendly and make them feel like there is no rush (William, 2009).

Weaknesses

The Do It yourself approach: The minimalist design of low cost do it yourself concept does not appeal to everyone. IKEAs target market is young and time conscious customers who also want convenience and may think the time involved in buying and assembling furniture is too much (Jurevicious, 2013). This means that IKEA loses potential furniture consumers especially in countries where demand of quality products is high. For example many Americans view the do it yourself furniture as of lower quality and kind like the ones one would buy at target (Williams, 2009).

Limited customized products: In an effort to maintain its low cost structure IKEA has standardized products in regards to their design (Perchinunno & Schirone, 2012). These products have been one of the reason the expansion of IKEA in the US has faced challenges because of the individuality of American consumers who want more accent, style and color options (Williams, 2009). The consumers are value customization and tend to go with marketers that address individual tastes and needs. IKEAs inability to provide more customized higher quality products allows other competitors to fill that market niche

Limited promotional expenditures: The IKEA Company marketing is done through use of catalogs and word of mouth and therefore does not spend a lot of resources on promotions (Jurevicious, 2013). Most consumers are not highly responsive to catalogs making this strategy less efficient in markets like the US. It widely known that American consumer is big on TV watching and using the internet. IKEAs advertisement has been accused of being too edgy for American audience and this means that IKEA is continuously losing on potential customer base (Perchinunno & Schirone, 2012).

Lack of proper online support: IKEAs online presence is unsatisfactory to consumers as the company website does not work properly (Jurevicious, 2013). This means that customers who can order online are forced to go the stores. Since there are not many stores available in the US, IKEA is losing valuable sales online.

These are the external factors that a business has no control over. Situational analysis is used by managers to identify specific opportunities and threats that can either improve or harm the company’s ability to maintain its competitive edge (Zentes et al., 2007).

Opportunities

Economic conditions: The current economic state is an opportunity for the growth of with the budget shopping. Many consumers are looking for different ways of cutting personal spending and IKEAs low cost, high quality strategy fits with that (Jurevicious, 2013). This means that most cost conscious customers will prefer IKEA as the most logical choice. Most American customers want to purchase products of high quality at a reasonable cost and convenient and time saving services (Dahlvig, 2012). This is a big opportunity for IKEA to expand its services and increase its market presence by offering customer experience.

Demand for convenience by customers: In this modern fast passed environment, the numbers of consumers opting for online shopping is on the rise. Technical savvy consumers are looking for the convenience and ease of online shopping (Grant, 2010). Offering convenient online shopping experiences of low cost and quality furnishings could allow IKEA to dominate the sector (Perchinunno & Schirone, 2012). It is important for IKEA to note that online shopping also buy into its low cost structure as it would enable them to sell items via distribution networks rather than use physical stores. The models of the company’s stores with its added amenities are well suited for customer needs.

Growing popularity of environmentally sustainable, stylish products: The Swedish design of products that is simple, edgy, sustainable designs offered by the company have grown in popularity so much that other competitors like target have similar products (Zentes et al., 2007). The shift towards going green has made consumers more interested in products that enhance the sustainability of natural resources. Consumers are more aware of companies’ carbon footprint and IKEA mantra of following environmental protection rules plays into this (Jurevicious, 2013). The company’s use of production remnants of wood and fabric are used to create more product and use natural colours is used to cut production costs and increase environmental responsibility is a win among going green consumers. IKEA is well equipped to take advantage of this trend.

Threats

Increasing Competition: Other large retailers such as Wal-Mart are vying for the do it yourself furniture market. These large retailers are also low cost and as customers become more cost conscious the offering from traditional stores like target and Wal-Mart pose serious competition (Zentes et al., 2007). IKEA online shopping also faces competition from other companies that offer similar products. For example bludot.com claims to offer low cost quality unassembled furniture. On the other hand furniture.com provides traditional furniture concept but offers the convenience of online shopping (Perchinunno & Schirone, 2012).

Changes in customers’ tastes and needs: The tastes and needs of customers are constantly changing which means that the interest of customers in DIY furniture will reduce (Perchinunno & Schirone, 2012). As population continues to age and growth of incomes occur it means that such consumers will buy less of the low cost and lower quality products and instead turn to the retailers offering high quality products (Grant, 2010).

Results of analysis

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Marketing objectives with performance indicators
In order to increase its popularity and expansion in the US, IKEA needs to eliminate its weaknesses and threats. IKEA can manage the weakness and threats in the following ways

Raising brand and product range awareness in the country

This marketing objective will enable IKEA to create awareness of its product range to people who are outside the store. This will be crucial in expanding the customer base. The goal is to reach potential customers and make them aware of products (Baraldi, 2008). This can be done through use of marketing campaigns using audio/visual media, social media and through special offers and promotions to customers.

Performance indicator: Number of out of town visiting showrooms and increased online sales. Increase in number of total number of sales.

Improving online experience for both new and returning customers

This marketing objective will help in increasing the internet traffic to the IKEA website. This will be crucial in attracting and maintaining customers who prefer online shopping (Grant, 2010). This will increase online sales as people in towns with no store will be able to access the products. This can be done through improving website support to ensure customer ease and satisfaction during ordering. Another way is by having social media initiatives through offering of promotions and building an online showroom for customers (Zentes et al., 2007). The company should also improve social media monitoring on twitter and face book to build trust and rapport with potential customers as well maintaining personal connections with customers.

Performance indicator: Rise in total number of online sales from existing customers as well as new customers. An increase in the number of new customers

Increasing product range development and adaptation to suit customized needs

IKEA must address the issue of limited customized products by adapting its offerings and stores to the local consumer tastes (Jurevicious, 2013). This is a powerful marketing strategy that will enable the company to increase its sales and competitive edge with traditional furniture retailers. Ensuring that most of the tastes and preferences for most of their customers are catered for ensures that they capture a wider market range (Zentes et al., 2007). Even though the current product range has attracted a wide market for the company, doing this will increase its relevance and hence, performance.

Performance indicator: The indicator for this will be increased range of customized products and availability of customized home deliveries.

Conclusion

The use of SWOT analysis allows companies to understand their internal as well external factors that impact positively or negatively to the competitiveness of the company. This report has presented an analysis of IKEA Company which is known globally for its low price high quality furniture and home furnishing accessories. IKEA’s company strategies that set it apart from its competitors include ensuring low prices is by establishing and maintaining low term supplier relationships and finding lowest cost of manufacturing. The production at the company is driven by the need to produce high quality products at low prices. Cost consciousness is a main factor in the operations strategy at IKEA. Instead of adopting traditional furniture company’s strategy of offering personalized service and advice in showrooms and boutiques with sales people competing for commission, IKEA has stores away from city centres where customers serve themselves. Despite its low cost high quality model the company has faced some challenges in the US markets. One of the challenges is individuality of American consumers who prefer customized products that offer wide range of products as well as competition from locally based retailers offering the same products.

References

Baraldi, E., 2008. Strategy in Industrial networks: experiences from IKEA. California Management Review, 4(50), pp.99-126.

Dahlvig, A., 2012. The IKEA edge: Building global growth and social good at the world’s most iconic home store. New York: McGraw-Hill.

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Ferrell, O. C., & Hartline, M. D., 2011. Marketing strategy. Sydney: South-Western Cengage Learning.

Grant, R.M., 2010. Contemporary strategy analysis and cases: Text & cases. Hoboken, N.J: Wiley.

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[Online] Available at:  http://www.strategicmanagementinsight.com/swot-analyses/ikea-swot-analysis.html   [Accessed 25 October 2014].

Perchinunno, P. & Schirone, D.A., 2012. Cluster analysis for strategic management: a case study of IKEA. In Computational Science and Its Applications–ICCSA 2012. Berlin: Springer Berlin Heidelberg. pp.88-101.

Suppiah, V. & Sandhu, M.S., 2011. Organisational culture’s influence on tacit knowledge-sharing behaviour. Journal of Knowledge Management, 15(3), pp.462-77.

Tarnovskaya, V.V. & de Chernatony, L., 2011. Internalising a brand across cultures: the case of IKEA. International Journal of Retail & Distribution Management, 39(8), pp.598-618.

The Times 100, 2012. SWOT analysis and sustainable business planning. [Online] Available at:   http://www.ices-study.org/WhatIsEnterpreneurship/CaseStudies/(case%20study)%20ikea.pdf  [Accessed 15 Julyl 2013].

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