Ikea Case Study 95w3y

Executive summery  Coverage of summery of issues 

Controlling standard and quality

Perhaps IKEA has reduced their product’s quality due cost leadership strategy they use. 

Assemble of product

IKEA has some complaints about that. Because of customers don’t know how to assemble properly. It can be happened accidents due non systematic fixing. 

High expansion Due to large num of outlets that difficult to manage under the same manner.

 Coverage of analysis 

The last major part and point of sale is the IKEA Stores. The majority of stores are franchised through Inter IKEA Systems B.V. by INGKA Holding Group and regardless of the franchisee all IKEA stores pay 3% of sales to Inter IKEA Systems B.V. on an annual basis. To gain a better understanding of IKEA’s corporate structure Further IKEA is a very dynamic and changing organization. This is very typical for a design oriented retail business, like IKEA, where customer tastes change quickly. Although the home furnishing industry is not as volatile as the fashion industry, IKEA has to respond quickly to customer preferences. To promote innovation and creativity IKEA’s management style is characterized to a high level by teamwork and participation and less by security and predictability. Summing up IKEA’s characteristics and its management style there are two concepts of corporate culture, which apply very well to IKEA: clan culture & adaptability culture. As IKEA grows even more global and its employees become even more diverse it is also questionable to which extent the organization will be able to preserve its set of Swedish values from global influences or whether IKEA’s values become only a masquerade to demonstrate their “Swedishness” to the outside world, but without direct influence internally. It is possible IKEA will undergo a culture change in the future. The term culture change refers to “changes in the values, attitudes, expectations, beliefs, abilities and behavior of employees. Culture changes pertain to changes in how employees think; these are changes in mind-set rather than in technology, structure, or products”.

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But will IKEA remain IKEA with a culture change? Or will the change even be necessary?  Coverage of Recommendation 1.) A culture change: As mentioned above, it is possible that IKEA will undergo a culture change in the future. In case a culture change will be necessary the recommendation would be to maintain the innovative and creative character of IKEA on the product part, while adding a culture of stability and security on the corporate part, and finally still maintaining the Swedish values of the organization, because that is the core of IKEA. However, adapting a more global culture in general to be suitable as an employer to the broad and diverse spectrum of IKEA employees, should be the overall goal of the culture change. 2.) The price pressure, which IKEA is underlying, is another major challenge, because competitors are plenty and the raw material market is volatile. At the same time IKEA has to be careful in the ethical treatment of employees, that do not belong directly to the organization but a part of its supply chain. 3.) Taking a look into the future it will possibly be necessary to implement a culture change. Maintaining the innovative and creative part of the business, adding a more stable and secure culture and holding on to the Swedish core values should be the objective of this change. The culture change should be implemented by a middle-out approach. 4.) Finally IKEA has to become an even more sustainable organization, since sustainability almost became a core requirement. One way to accomplish that would be a system to effectively recycle old (IKEA) products and make new furniture of them.

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Introduction I this case study I have demonstrated internationally known home future retailer which is IKEA the largest furniture retailer in the world. The purpose of this case study is to analyze to problems they have as well as solutions, recommendation for that in addition also marketing strategies to reach to customers which they are using and advantage and disadvantage of them. About IKEA IKEA is a multinational group of companies its industry is retails that designs and sells ready to assemble furniture as well as another more 9500 products including home accessories. And also 147,000 employees work under this company around the world. Founded was this company Sweden in 1943 by then-17-year-old Ingvar Kamprad, who was listed as one of the world's richest people in 2013. Its interior design work is often associated with an ecofriendly simplicity. As of March 2016, Ikea owns and operates 384 stores in 48 countries. IKEA 's biggest market, followed by the United States, with 42 stores. It is a favorite among customers searching for well designed products at low prices. IKEA stores sell ready to assemble furniture, appliances, and household goods. Today the firm is the largest furniture retailer in the world, with 139,000 employees operating in 48 countries. is the firm’s largest market, followed by the United States and . Its large range of products includes furniture, food, large items such as cabinetry, and smaller items such as kitchenware, décor, and small plants. IKEA also operates restaurants within their stores as a special trick. IKEA has become known for its well-designed, low cost products, its eco-friendly initiatives, and its reputation for a great work place. As a special feature Stores also contain a play area for children called Småland. Parents can drop their children off in the play area for up to 1 hour free of charge as they go shopping. Short term Issues Problem 01 The size and scale of its global business. This could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products. Solution. Solution Perhaps expand new staff for managerial pathway that particularly talented managers for rich coordinating with top management frequently and accurately. In addition maintain the good supply chain as same as quality and services similar to another stores. Problem 02 The high flow of visitors at one time leads to many problems resulted from lack of manpower who can meet this high point. 3

Solution Enhance the traffic insight visitor flow system to ensure its check out and check in with staff for reduce the customer waiting time for at the cashier.

Medium Term Issues Problem 01 IKEA’s main competitive advantage is a low cost strategy. So in that case it is brilliant for the south Indian countries. Especially who are the people living in developing countries that they always focus only where is the cheapest products which they needed unless this kind of customers don’t worry about brand reputation. Because of thin wallet they have. As per the IKEA’s purpose those countries are potential market for their products. But unfortunately IKEA is still planning to implement in India as well an extra south Asian countries except Hyderabad in India. May be when IKEA will reach to them competitors would be already taken the tarket market at there. Solution Implement the rapid expansion the market share in South Asian countries including all other developing countries. Moreover its better develop cheapest products for these countries as local specialized.

Long term Issues Problem 01 Negative publicity. The company has been criticized many times for issues like poor treatment of employees, uncertain advertising practices or lobbying government authorities. Negative publicity decreases brand reputation and customer loyalty. Solution Try to be like the best employee job satisfaction plan in Google, Samsung, Apple Inc. which they use.

Problem 02 IKEA suffer from lack of innovation and faces possibility of offering a very similar product base. This is due in part to the lack of fresh blood in the organization. IKEA‘s policy is hiring the same type of people lead to inhibiting diversity and innovation to 4

meet change in new markets. Perhaps why IKEA doesn’t have enthusiastic for innovation, for the reason that they already popular and succeeded. Solution IKEA should broaden its selection base of hiring people. Whist not changing the core competencies required of key staff. a new emphasis should be placed on the hiring of people from a mix of backgrounds and personalities. This will promote diversity, infusion of new ideas and ensure the richness of the culture. Because as per the current situation of business world there is no more survive to forward without rapid innovation. Why so no barrel. Due that free entry completion is very high. Its better increase the expenditure for R & D to create innovation with unique features. Problem 03 Limitation This diversity may however lead to lack of similarity and a distraction from the common goals. There may be a waste of resources to get such a diverse group to agree to a common group. What are some of the things IKEA is doing right to reach consumers in different markets? 1. Solving the worst part of buying furniture. Before IKEA existed, people saw furniture as an investment for the next 20 years. This resulted in a lot of anxiety and indecision. They created products that were nicely designed, if not particularly durable, that were intended to be used immediately, and disposed of when they wore out or, more likely, when the had moved on to a different taste level or purchasing strata. Hitting the right demographic. The products are clean, with simple visual and “fanciful” names. And also not expensive, but not too cheap. 

IKEA’s price point is perfect.

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While prices are cheaper at deep discounters like Aldi, shoppers feel they are getting a good value at IKEA.

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Stores are a destination.

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As e-commerce becomes more popular, shoppers need incentive to come into stores.

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With its elaborate showroom and cafeteria, IKEA has become a unique destination for shoppers.

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While many retailers enter shopping centers hoping for traffic, IKEA is a separate store that shoppers seek out with a specific goal in mind. 2 Low cost leadership strategies IKEA has a unique business model that connects the needs of our customers with the possibilities on the factory floor. With a deep knowledge about life at home the challenges most of us have with limited space and wallets on one hand and big dreams on the other, IKEA often develops its products directly on the factory floor. The starting point for product developers and designers is always the price. Together with their skilled suppliers, we make sure to get the most out of the possibilities in the production plants. They adapt the sizes and constructions of our products so we can produce, package and transport them in the most efficient way. Product strategy 

Wide range of products according to the need of consumers.

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Products available for different sections of the society.

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Most IKEA products are stylish that makes the company unique

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IKEA designs its own furniture

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Diversity product line and product depth

Promotion strategy 

High profitable ment campaign

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Spending 70% of annual marketing budget in printing catalogue

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Upon entry to IKEA store shoppers are guided property

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Online shopping

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IKEA providing home delivery service to its customers 6

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After sale service to the customers

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Online ments

Marketing Development strategy Target new segments and enter new markets with existing products. The potential benefits of international expansion are increased market share, revenues, profit and buyer awareness. 4 ps of IKEA Products Design, Variety and range of furniture

Price

Outdoor, children, kitchen,

low

office, Mirrors, beds and mattress,

chairs,

Place

promotion

outskirts of large Women, youth, children, cities, large stores

family,fashionable people,

storage,

people who love modern

decoration, lighting, sofas,

and innovative stuff, low

tables, ]

income families

Value great products of IKEA using 

Conveniences

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Functionality

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Price

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Quality

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Clever solutions

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Great value to the customers Promotional Mix

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Media tactics

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Public relations tactics

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Direct mail tactics

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In store displays

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Store layout 7

Role of IKEA s advertising 

Social ( UNICEF)

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Environmental ( sustainability)

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Economic ( Low price, value employees)

What else could it be doing?

 Staffing  Improve quality of services  Monitoring control  Community based rehabilitation  Community development programs  Health care services  Expansion pans IKEA  Monitoring  IKEA CSR department  Avoid same mistakes  Become part of any community we enter

IKEA essentially changed the way people shop for furniture. Discuss pros and consof this strategy Pros: IKEA’s low cost concept keeps it ahead of its competitors IKEA has successfully combined low cost with good quality. IKEA’s ability to find ways to alter designs to save on manufacturing costs A key feature of IKEA’s furniture is self-assembly IKEA’s ability to adapt its product design strategies according to the market Family Oriented Affordable to everyone Because of the wide variety of items displayed and the layout of the shop designed in a one-way format results in customers seeing everything available. They might therefore end up buying even something that they hadn’t thought about. Convenience for the customer because everything is boxed and they do their own assembling. It makes it easy to transport (on buying and when people move) 8

Also saving shelf space for other IKEA products and reducing transport costs for the consumer hence resulting in the lower prices Using unconventional names for their products that people can easily (belief is that people names better than they do codes) Cons Cost leading Strategy Lack of product innovation Changing social trend can hinder the growth of sales of IKEA The size and scale of IKEA sometimes affects the quality standards of their products and therefore negatively affect the view that customers have of them. A such customers will have to pay more attention to the products they are buying The format of the shop (everything is on floor) can be too overwhelming for the customers such that they may not even know where to start from Not maximizing on the growing technology available for marketing and advertising, so consumers might end up going elsewhere The fact that that people have to assemble their own items can be problematic for people who are not good at fixing or assembling items

Recommendations Expensive e - commerce shipping 1. Promote a temporary discount on shopping rates  Promote a temporary discount on shipping rates Sign up for loyalty programe and get free shopping Measuring effectiveness If the promotion is successful , it will generate additional online sales Complex product names 2. Change product names to fit the market  Take from globalization to localization  Easier to start buzz about product 9

 Measure effectiveness of recommendation using cont an VIII.

Conclusion

The price pressure, which IKEA is underlying, is another major challenge, because competitors are plenty and the raw material market is volatile. At the same time IKEA has to be careful in the ethical treatment of employees, that do not belong directly to the organization but a part of its supply chain. Finally IKEA has to become an even more sustainable organization, since sustainability almost became a core requirement. One way to accomplish that would be a system to effectively recycle old (IKEA) products and make new furniture of them. References : Harvard business References

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