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Brand Management of by,
Nirvik Mitter
11BSPHH010542
Building a
Global Brand
by Nirvik Mitter
2
Journey towards a global cult status…
IKEA by Nirvik Mitter
by Nirvik Mitter
3
An Overview of what is in the IKEA store as you
turn the pages. . .
 Introduction / Origin & Genesis o...
by Nirvik Mitter
4
Introduction / Origin & Genesis of the brand
with associated brand stories and Timeline
The Stitching I...
by Nirvik Mitter
5
The name IKEA comes from the initials of Ingvar Kamprad, I and K, plus the first letters of Elmtaryd an...
by Nirvik Mitter
6
IKEA Facts
by Nirvik Mitter
7
History
How it all began:
The following history shows how over six decades IKEA went from the woods of ...
by Nirvik Mitter
8
1960’s – 1970’s
The IKEA concept starts to take shape. New IKEA stores open and hero
products are devel...
by Nirvik Mitter
9
IKEA - The Last Decade
2000
 The first IKEA store opens in Moscow, Russia.
 The code of conduct calle...
by Nirvik Mitter
10
2005
 Everything for the bedroom under one roof. A complete and co-ordinated collection of bedroom
fu...
by Nirvik Mitter
11
Our Business !dea
Our vision and business idea
At IKEA our vision is to create a better everyday life ...
by Nirvik Mitter
12
Structure & Corporate Management of brand
with principal executives and brand managers
by Nirvik Mitter
13
IKEA
IKEA's complicated corporate structure is believed to be designed to protect the Kamprad family f...
by Nirvik Mitter
14
Swedwood
Swedwood is the name for the industrial companies that manufacture IKEA products.
Swedwood wa...
by Nirvik Mitter
15
IKEA Stores
The majority of stores are franchised through Inter IKEA Systems B.V. by INGKA Holding Gro...
by Nirvik Mitter
16
The IKEA corporate structure is divided into two main parts: operations and franchising. Most of IKEA'...
by Nirvik Mitter
17
Brand portfolio with S.T.P.
by Nirvik Mitter
18
IKEAPortfolio
by Nirvik Mitter
19
The Full IKEA Portfolio in a new avatar
Apple App - http://goo.gl/v0S5T
IKEA App - http://goo.gl/7cMQj...
by Nirvik Mitter
20
by Nirvik Mitter
21
by Nirvik Mitter
22
by Nirvik Mitter
23
by Nirvik Mitter
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by Nirvik Mitter
25
by Nirvik Mitter
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by Nirvik Mitter
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Advertisements by
by Nirvik Mitter
28
IKEA and INTERMARKET SEGMENTATION
In a market there are different people having different demand but d...
by Nirvik Mitter
29
by Nirvik Mitter
30
by Nirvik Mitter
31
Core Competency by using the Product Strategy
A broad product line, including multi-function and diffe...
by Nirvik Mitter
32
Core Competency by using the Promotion Strategy
Build up a good brand perception to customer in both p...
by Nirvik Mitter
33
Core Competency by using the Price Strategy
IKEA will base on the low-cost design philosophy and metho...
by Nirvik Mitter
34
by Nirvik Mitter
35
by Nirvik Mitter
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Core Competency by using the Place Strategy
IKEA will choose a large area to present their products an...
by Nirvik Mitter
37
Ansoff's Product-Market Matrix
By using the Ansoff's Product-Market Matrix to the case of IKEA, we fou...
by Nirvik Mitter
38
by Nirvik Mitter
39
Advertising Agencies associated with the brand
and covering all strategic brand campaigns -
Timeline
A...
by Nirvik Mitter
40
In 1994, IKEA ran a commercial in the United States widely thought to be the first commercial featurin...
by Nirvik Mitter
41
IKEA launched a UK-wide "Home is the Most Important Place in the World" advertising campaign in
Septem...
by Nirvik Mitter
42
In 2008,IKEApaired up with the makers of popular video game The Sims 2to makea stuff pack called The
S...
by Nirvik Mitter
43
In January 2009, just before the new store opened in Southampton, the MV Red Osprey of Red
Funnel was ...
by Nirvik Mitter
44
In April 2011, an advertising campaign for which aims to discover whether men or women are messier in
...
by Nirvik Mitter
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During the launch of the new catalogue in August 2012, IKEA toured with giant IKEA catalogue through
t...
by Nirvik Mitter
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by Nirvik Mitter
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Market Environment Including Sectoral &
Industry Analysis
Market Analysis:
Market analysis is consiste...
by Nirvik Mitter
48
 Market Size. The size of the market can be based on the present sales or
on potential ones. The nomi...
by Nirvik Mitter
49
IKEA Value-Chain Analysis
“Each step in the manufacture of a product or the delivery of a service can ...
by Nirvik Mitter
50
The following tables represent an analysis of IKEA operations on the basis of Value-Chain
analytical f...
by Nirvik Mitter
51
Support Activities
by Nirvik Mitter
52
by Nirvik Mitter
53
PEST Analysis - IKEA
PEST is an acronym for Political, Economic, Social and Technological factors that...
by Nirvik Mitter
54
Porter’s 6 Forces
Power of Buyers: There is a little power because of the exiting low-price options. F...
by Nirvik Mitter
55
Substitutes: There is no specific product that can be a substitute for furniture but IKEA at least,
ha...
by Nirvik Mitter
56
Strengths:
 Leading retailer of home furniture & furnishings
 Strong global brand image
 IKEA‘s vis...
by Nirvik Mitter
57
Weaknesses:
 Stuck in the middle
 D.I.Y. nature
 Logistic cost
 Detracting to attain organization ...
by Nirvik Mitter
58
Opportunities:
 Opportunity to enter in broad market such as Asian market
 To sustain in long run
 ...
by Nirvik Mitter
59
Threats:
 To sustain in the long run
 To follow the strategies more than one for long run
 Changing...
by Nirvik Mitter
60
TOWS Metrics Analysis
by Nirvik Mitter
61
Competitor analysis including market shares and
brand rankings as per inter-brand /super-brand
etc.
by Nirvik Mitter
62
by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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Industry Analysis
Western furniture history
 The classical world---practicability & durability
Ancien...
by Nirvik Mitter
68
by Nirvik Mitter
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Costing & Pricing analysis of brand portfolio
by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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Consumer Behaviour and Brand ambassadors
How IKEA seduces us:
 A fashionista runs the place
 They kn...
by Nirvik Mitter
74
IKEA Creates First Interactive Catalogue & Tracks Consumer Behaviour
IKEA has just unveiled its first ...
by Nirvik Mitter
75
Brand repositioning campaigns (if any) and the
reasons for it
by Nirvik Mitter
76
by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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by Nirvik Mitter
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Complexity of the Market Environment and the
Key Business Challenges for IKEA
IKEA has an effective bu...
by Nirvik Mitter
84
Recommendations for the brand to achieve the
TOM 1-2-3 status
 Continued Expansion with Further Resea...
by Nirvik Mitter
85
More Recommendations for IKEA
The current leadership and management practices in IKEA are promoted by ...
by Nirvik Mitter
86
A Rationalised Improvement Plan for IKEA
As it has been shown above, the rationalised improvement plan...
by Nirvik Mitter
87
Ingols et al (2011) divide the variables within Burke-Litwin model of change into two
categories: tran...
by Nirvik Mitter
88
Current Situation within IKEA Affecting the
Implementation of Rationalised Improvement Plan
The plan p...
by Nirvik Mitter
89
Alternative Options for IKEA
Alternative approaches need to be developed for IKEA that would address t...
by Nirvik Mitter
90
Recommendations for IKEA to Address Major
Challenges
Firstly, focusing on using recycled materials. Th...
by Nirvik Mitter
91
Factors that Might Influence Implementation of
Recommendations
Specific factors may affect the impleme...
by Nirvik Mitter
92
by Nirvik Mitter
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What is the future of this brand?
by Nirvik Mitter
94
IKEA Trivia
by Nirvik Mitter
95
IKEA Advertisements
IKEA Ad
Watch at – http://goo.gl/HnhRZ
IKEA smallest store
Watch at – http://goo.g...
by Nirvik Mitter
96
Final Conclusion
IKEA is a well-known global brand with hundreds of stores across the
world. In order ...
by Nirvik Mitter
97
References
• Competitive Strategy: Techniques for Analyzing Industries and Competitors Michael E. Port...
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IKEA | Brand Management | MAGNAMOPUS

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IKEA - Brand Management

An Overview of what is in the IKEA store as you turn the pages. . .

Intro
Origin & Genesis
History & Last Decade
Business !dea
Structure and Corporate Management
Brand Portfolio with STP and Consumer Activations
IKEA and inter-market segmentation
4Ps & core competency
AD agencies and Strategic Brand Campaigns
Market Environment (Sectoral and Industrial Analysis)
IKEA value chain
PEST analysis
Porter's 6 forces
S.W.O.T.
TOWS metrics
Competitor Analysis
Industry Analysis
Costing and Pricing analysis of brand portfolio
Consumer Behavior & Brand Ambassadors
Brand repositioning campaigns
Rationalized improvement plan
Future of IKEA
Alternate options for IKEA
IKEA Trivia
IKEA Advertisements all over and AugmentedReality/QR content

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Transcript of "IKEA | Brand Management | MAGNAMOPUS"

  1. 1. Brand Management of by, Nirvik Mitter 11BSPHH010542 Building a Global Brand
  2. 2. by Nirvik Mitter 2 Journey towards a global cult status… IKEA by Nirvik Mitter
  3. 3. by Nirvik Mitter 3 An Overview of what is in the IKEA store as you turn the pages. . .  Introduction / Origin & Genesis of the brand with associated brand stories and Timeline - 4  The IKEA Concept, its Roots and some Facts - 5  History and The Last Decade - 7  Our Business !dea - 11  Structure & Corporate Management of brand with principal executives and brand managers - 12  Brand portfolio with S.T.P. and Consumer Activations - 17  IKEA and INTERMARKET SEGMENTATION - 28  4Ps Strategy and core competency - 29  Advertising Agencies associated with the brand and covering all strategic brand campaigns - Timeline - 38  Market Environment Including Sectoral & Industry Analysis - 47  IKEA Value-Chain Analysis and PEST Analysis - 49  Porter’s 6 Forces - 54  S.W.O.T. Analysis - 55  TOWS Metrics Analysis - 60  Competitor analysis including market shares and brand rankings as per inter-brand /super- brand etc. - 61  Industry Analysis - 67  Costing & Pricing analysis of brand portfolio - 69  Consumer Behaviour and Brand ambassadors - 73  Brand repositioning campaigns (if any) and the reasons for it - 75  Complexity of the Market Environment and the Key Business Challenges for IKEA - 83  Recommendations for the brand to achieve the TOM 1-2-3 status - 84  A Rationalised Improvement Plan for IKEA - 86  Alternative Options for IKEA - 89  What is the future of this brand? - 93  IKEA Trivia and Final Conclusion - 94  References - 97  And various IKEA Advertisements floating from page to page. . .
  4. 4. by Nirvik Mitter 4 Introduction / Origin & Genesis of the brand with associated brand stories and Timeline The Stitching INGKA Foundation is a Dutch foundation founded in 1982 by Ingvar Kamprad, the Swedish billionaire, who is founder andchairman of IKEA and is one of the largest charitable foundations in the world. The name "INGKA" comes from a contraction of his name; "Stitching" is the Dutch language word for foundation. The stated purpose is - To promote and support innovation in the field of architectural and interior design. The foundationowns theprivate Dutch companyINGKA Holding based inLeiden, which is the holding company controlling 207 of the 235 outlets of IKEA. It is the second largest [non-profit organization] in the world. In 2011, the foundation reportedly gave 65 million euros, however, in that year plans were announced to increase the contributions to about 100 million euros per year, with 40 million euros over three years going to the Dadaab refugee camp in Kenya with the rest split between UN agencies such as UNICEF, UNHCR and UNDP, and Save the Children ~ C.S.R.
  5. 5. by Nirvik Mitter 5 The name IKEA comes from the initials of Ingvar Kamprad, I and K, plus the first letters of Elmtaryd and Agunnaryd, which are the names of the farm and village where he grew up. The IKEA Concept The IKEA Concept is founded on a low-price offer in home furnishings. It is based on offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Rather than selling expensive home furnishings that only a few can buy, the IKEA Concept makes it possible to serve the many by providing low-priced products that contribute to helping more people live a better life at home. The IKEA Concept guides the way IKEA products are designed, manufactured, transported, sold and assembled. All of these factors contribute to transforming the IKEA Concept into a reality. The roots of the IKEA Concept The IKEA Concept began when Ingvar Kamprad, an entrepreneur from the Småland province in southern Sweden, had an innovative idea. In Småland, although the soil is thin and poor, the people have a reputation for working hard, living frugally and making the most out of limited resources. So when Ingvar started his furniture business in the late 1940s, he applied the lessons he learned in Småland to the home furnishings market. Ingvar’s innovative idea was to offer home furnishing products of good function and design at prices much lower than competitors by using simple cost-cutting solutions that did not affect the quality of products. Ingvar used every opportunity to reduce costs, and he scraped and saved in every way possible - except on ideas and quality. This is how the IKEA Concept began. Today, the IKEA trademark represents the leading home furnishings brand in the world with more than 330 stores in 40 countries and close to 154,000 co-workers.
  6. 6. by Nirvik Mitter 6 IKEA Facts
  7. 7. by Nirvik Mitter 7 History How it all began: The following history shows how over six decades IKEA went from the woods of southern Sweden to being a major retail experience in 40 countries/territories around the world. The IKEA story begins in 1926 when founder Ingvar Kamprad is born in Småland in southern Sweden. He is raised on 'Elmtaryd', a farm near the small village of Agunnaryd. Even as a youngboyIngvar knows he wants to develop a business. 1920’s At the age of five Ingvar Kamprad starts selling matches to his nearby neighbours and by the time he is seven, he starts selling further afield, using his bicycle. He finds that he can buy matches in bulk cheaply in Stockholm and re-sell them individually at a very low price but still make a good profit. From matches he expands to selling flower seeds, greeting cards, Christmas tree decorations, and later pencils and ball-point pens. 1940’s – 1950’s The roots of a furniture dealer. Ingvar Kamprad is entrepreneurial in developing IKEA into a furniture retailer. This period sees the exploration of furniture design, self-assembly, advertising, the use of a catalogue and a showroom to reach the many people.
  8. 8. by Nirvik Mitter 8 1960’s – 1970’s The IKEA concept starts to take shape. New IKEA stores open and hero products are developed such as POÄNG and BILLY bookcase. It is a time where concept takes shape and is documented in Ingvar Kamprad's The Testament of a Furniture Dealer. 1980’s IKEA expands dramatically into new markets such as USA, Italy, France and the UK. More IKEA classics arrive such as KLIPPAN, LACK and MOMENT. IKEA begins to take the form of today's modern IKEA. 1990’s IKEA grows even more. Children's IKEA is introduced and the focus is on home furnishing solutions to meet the needs of families with children. The IKEA Group is formed and responsibility for people and the environment is seen as a prerequisite for doing good business. 2000’s IKEA expands into even more markets such as Japan and Russia. Everything for the bedroom and kitchen is explored and presented in co-ordinated furnishing solutions. This period also sees the successes of several partnerships regarding social and environmental projects.
  9. 9. by Nirvik Mitter 9 IKEA - The Last Decade 2000  The first IKEA store opens in Moscow, Russia.  The code of conduct called The IKEA Way on Purchasing Home Furnishing Products (IWAY) is launched.  Child rights project in India. The IKEA Group, in co-operation with UNICEF, initiates a broad community program in northern India to address the root causes of child labour.  IKEA customers can shop online. E-shopping is launched in Sweden and Denmark. Since then many other markets have started offering online shopping at IKEA. 2001  IKEA Rail begins. The IKEA Group trials running its own rail operations through IKEA Rail AB. The train runs five round trips a week between Älmhult, in Sweden, and Duisburg, in Germany.  Another innovative product. IKEA becomes one of the first manufacturers to produce furniture with patterns produced directly on fibre-board and particleboard, in a factory in Poland. This technique is called print-on-board.  Anders Dahlvig speaks at a Greenpeace conference in London.  A new head office for the IKEA Group. The IKEA Group moves its head office from Humlebaek in Denmark to Leiden in the Netherlands. 2002  IKEA recovery is launched. A new product-recovery concept is implemented in more than 100 IKEA stores in Europe to ensure that returned products are, where possible, repaired instead of being wasted.  The IKEA and WWF Co-operation on Forest Projects. 2003 The fourth IKEA PS collection is launched. 2004  IKEA arrives in Portugal. The first IKEA store in Lisbon.  The IKEA Group publishes its first Social & Environmental Responsibility Report.  The IKEA New Haven store in the US is the 200th IKEA Group store worldwide.
  10. 10. by Nirvik Mitter 10 2005  Everything for the bedroom under one roof. A complete and co-ordinated collection of bedroom furnishings is launched, including everything from mattresses to smart storage solutions and textiles for all tastes.  IKEA expands its focus to kitchen solutions. IKEA wants to make life in the kitchen easier, after all it is one of the most-used rooms in the house. So IKEA looks into all the ways life in the kitchen can be more fun. The result is a wide range of co-ordinated kitchens and dining furnishings that make kitchen life easier.  IKEA customers help children in need. Customer purchases of IKEA soft toys help raise funds for UNICEF and Save the Children projects focusing on children and their welfare. This yearly campaign has to date raised a total of 4.8 million euros.  The fifth IKEA PS collection is launched. What if the wildest ideas become the wisest solutions? The fifth IKEA PS collection is launched under the headline 'What If...?' Twenty-eight designers develop a range in which innovation is the key word for materials, design, function and techniques. The range includes everything from rugs with hinges and pillows for your feet, to t-shirt-shaped cushions and rocking dining chairs made from wooden plastic.  IKEA and WWF co-operate on cotton cultivation.  IKEA gives in-kind donations. Schools in Liberia and Burundi receive 9,000 tables each for a UNICEF school project. After the tsunami, IKEA gives UNICEF an in-kind donation of 125,000 bed sheets, 100,000 quilts, 18,000 blankets, 145,000 toys and 300 mattresses to help victims in Indonesia, Sri Lanka and India.  IKEA Social Initiative. An organisation called IKEA Social Initiative is formed to handle global community involvement through its partnerships with Save the Children and UNICEF. 2006  IKEA arrives in Japan. After previous explorations of Japan with a joint venture in the 70s, the IKEA Group opens its first fully-owned store in Tokyo.  Our co-workers. The IKEA Group exceeds 100,000 co-workers and operates in 44 countries.  Preventing illegal logging. The IKEA Group and WWF join forces to curb illegal logging in Russia and reward legal forestry in Russia and China.  IKEA Group donates quilts to Pakistan earthquake victims. The Pakistan earthquake in October 2005 leaves many people in a desperate situation. Over 335,000 IKEA quilts are donated to UNICEF and their efforts to help improve the living conditions of the survivors.  IKEA Food is launched. IKEA launches its own food label covering about30 percent of the 150 products in its food range. The range focuses on high-quality food products based on Swedish recipes and tradition, for a low price. The products have an IKEA label andare sold in Swedish Food Markets in IKEAstores andarealso served in IKEA restaurants. 2007  IKEA and WWF Co-operation on climate change. The IKEA Group and WWF start to co-operate on projects aimed at reducing emissions of greenhouse gases generated by IKEA operations.  The most international IKEA store. IKEA Haparanda opens the most international IKEA store yet. It is uniquely placed on the border between Sweden and Finland and a catchment area that also includes Russia and Norway.
  11. 11. by Nirvik Mitter 11 Our Business !dea Our vision and business idea At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Our product range The IKEA product range focuses on good design and function at a low price. It offers home furnishing solutions for every room in the home. It has something for the romantic at heart, the minimalist and everyone in between. It is co-ordinated so that no matter which style you prefer our designers and product developers work hard to ensure that our products meet your day-to-day needs and eliminates the unnecessary. Our low prices Low prices are the cornerstone of the IKEA vision and our business idea. The basic thinking behind all IKEA products is that low prices make well-designed, functional home furnishings available to everyone. We are constantly trying to do everything a little better, a little simpler, more efficiently and always cost-effectively. A better everyday life We have taken the straightforward approach to the furniture business, bystarting with developing furniture with the price tagin mind. This is the IKEAway, to maximize the useof raw materials inorder to fulfil people's needs and preferences by offering quality products at an affordable price.
  12. 12. by Nirvik Mitter 12 Structure & Corporate Management of brand with principal executives and brand managers
  13. 13. by Nirvik Mitter 13 IKEA IKEA's complicated corporate structure is believed to be designed to protect the Kamprad family from taxes and to avoid the possibility of a takeover of IKEA. Though Ingvar Kamprad, the founder of IKEA, is often cited as one of the wealthiest men in the world, Kamprad does not technically own IKEA. IKEA is privately held by a foundation, which in turn owns a group that controls the companies that run IKEA's individual operations. Responsible for this tangled web of corporations, foundations and tax shelters is IKANO, a Swedish group also owned by the Kamprad family that is primarily concerned with managing the Kamprad family fortune, though interestingly, in 2008 it owned 25% of Habitat, another large European based furniture store. Stichting INGKA Foundation IKEA is actually a privately held company owned by Stichting INGKA Foundation, a non-profit registered in Leiden in the Netherlands which is controlled by the Kamprad family. The Dutch foundation, worth US$36 billion in 2006, according to The Economist, was created by Kamprad in 1982 for the stated purpose, "To promote and support innovation in the field of architectural and interior design." Stichting INGKA Foundation is the owner of INGKA Holding B.V. Kamprad transferred 100% of his equity in IKEA to the foundation as an irrevocable gift in 1984. It is thought that he did this to protect IKEA from family squabbling - IKEA will never be inherited in whole or part by his three sons (Peter, Jonas and Mathias). Says Kamprad, "My family [will] never [have] the chance to sell or destroy the company." In 2007, there was an internet scam involving an email purportedly from the Stichting INGKA Foundation granting funds to the recipient for their "personal, educational and business development." These emails are an obvious attempt at 'phishing' or attempting to gain personal information from the recipient in order to exploit money. INGKA Holding B.V. INGKA Holding B.V. is the parent company for all of the IKEA Group companies which is governed by a Supervisory Board; Goran Grosskopf is the Chairman. Though ostensibly retired, Ingvar Kamprad serves as Senior Advisor, while his son Mathias is onthe Supervisory Board. The IKEA Group companies are comprised of IKEA Services B.V. and IKEA Services AB which have nine divisions in Sweden and the Netherlands which support the work in all the IKEA Group companies. IKEAGroup: IKEA Group Management IKEA Group Management is composed of: Anders Dahlvig - President and CEO of IKEA Group; Hans Gydell - Group Vice President; Sören Hansen - Chief Financial Officer; Lars Gejrot - Head of Human Resources; Torbjörn Lööf - Head of CS Region West; Peter Högsted - President of the UK division; Ian Duffy - President of the Asia Pacific division; Pernille Spiers-Lopez - President of the North America division; Göran Stark is responsible for Industry Investment and Development; Werner Weber - President of the Germany division and Mikael Ohlsson. IKEA Group Companies The IKEA Group Companies are primarily concerned with carrying out the necessary functions to bring IKEA products to market. The companies include Swedwood, IKEA of Sweden, Purchasing, Distribution, and other functions such as Human Services, Internet Technology and Communications.
  14. 14. by Nirvik Mitter 14 Swedwood Swedwood is the name for the industrial companies that manufacture IKEA products. Swedwood was formed in response to the economic andpolitical upheaval that began with the fall of the Berlin wall in 1989. In 1991, Swedwood was born, forever changing how IKEA does business. Though Swedwood has branched out into North America with the opening of a plant in Danville, VA and into other parts of the world, the majority of the labor remains in the Eastern European nations. With over 7000 employees in FY2007, Poland makes up 52% of Swedwood's employee base. Slovakia comes in second with 2130 employees (18%), and Russia is third with 1290 employees (9%). Swedwood is responsible for ensuring compliance with IWAY - the IKEA Way of Purchasing Home Furniture Products. These are IKEA's internal policies governing everything from environmental issues, worker safety, compliance with local laws and regulations to social welfare and manufacturers who contractto do business with IKEA must abide by these policies. IKEA of Sweden IKEA of Sweden, located in Älmhult, Sweden, employs the designers that design and develop the IKEA range of products that are sold in IKEA stores. IKEA designers work on the original principle, "to create a better everyday life for the many people." Purchasing and Supplies IKEA maintains 41 Trading Service Offices in 30 countries, and has over 1350 suppliers in over 50 countries. Purchasing is responsible for ensuring reliable production, efficiency and minimal waste in manufacturing processes. Distribution Distribution is responsible not only for moving products from point A to point B, but also for maximizing efficiency, analyzing and managing supply chain issues and maintaining quality control throughout the supply chain - from the manufacturer to the customer in the warehouse. Distribution is also responsible for the Recovery department, which maintains the AS-IS room (also known as the Bargain Corner). There are over 27 distribution centres and 11 customer distribution centres in 16 countries. Inter IKEA Systems B.V. Separate from the IKEA Group companies is Inter IKEA Systems B.V. which is registered in Delft, The Netherlands and is the owner of the IKEA concept and trademark, and is the franchisor of the IKEA concept worldwide. According to the website for Inter IKEA B.V., "the objective of Inter IKEA Systems B.V. is to increase the availability of IKEA products through world-wide franchising of the IKEA Concept." Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but is owned rather by Inter IKEA Holding S.A. which is registered in Luxemburg and is part of Inter IKEA Holding which is registered in the Netherlands Antilles. The ownership of these holding companies has not been disclosed, but it is widely assumed to be owned in part or full by the Kamprad family.
  15. 15. by Nirvik Mitter 15 IKEA Stores The majority of stores are franchised through Inter IKEA Systems B.V. by INGKA Holding Group, which operates stores throughout Europe, North America and Australia. Other stores are franchised independently. Regardless of the franchisee, all IKEA stores pay 3% of sales to Inter IKEA Systems B.V. on an annual basis. The IKEA franchise structure Inter IKEA Systems B.V. is the owner of the IKEA Concept including the IKEA Trademarks worldwide and is the worldwide IKEA franchisor. For the rights to use the IKEA systems and methods, its continuous development and improvements, the IKEA Group and all other IKEA franchisees pay a franchise fee to Inter IKEA Systems B.V. The relationship between the franchisor Inter IKEA Systems B.V. and its franchisees is a business relationship between independent companies. Inter IKEA Systems B.V. is part of Inter IKEA Group. Inter IKEA Group and IKEA Group are two separate groups of companies with different owners. Around the globe there are companies owned outside the IKEA Group that are also operating under the IKEA trademarks.
  16. 16. by Nirvik Mitter 16 The IKEA corporate structure is divided into two main parts: operations and franchising. Most of IKEA's operations, including the management of the majority of its stores, the design and manufacture of its furniture, and purchasing and supply functions are overseen by Ingka Holding, a private, for-profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by the INGKA Holding. The remaining 30 stores are run by franchisees outside of the INGKA Holding. INGKA Holding is not an independent company, but is wholly owned by the Stichting Ingka Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt, not-for-profit foundation. The Ingka Foundation is controlled by a five-member executive committee that is chaired by Kamprad and includes his wife and attorney. While most IKEA stores operate under the direct purview of Ingka Holding and the Ingka Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch company, Inter IKEA Systems. Every IKEA store, including those run by Ingka Holding, pays a franchise fee of 3% of the revenue to Inter IKEA Systems. The ownership of Inter IKEA Systems is exceedingly complicated and, ultimately, uncertain. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered in Luxembourg. Inter IKEA Holding, in turn, belongs to an identically named company in the Netherlands Antilles that is run by a trust company based in Curaçao. The owners of this trust company are unknown (IKEA refuses to identify them) but are assumed to be members of the Kamprad family.
  17. 17. by Nirvik Mitter 17 Brand portfolio with S.T.P.
  18. 18. by Nirvik Mitter 18 IKEAPortfolio
  19. 19. by Nirvik Mitter 19 The Full IKEA Portfolio in a new avatar Apple App - http://goo.gl/v0S5T IKEA App - http://goo.gl/7cMQj IKEA Catalogue 2013 App – http://goo.gl/MGDOZ (* Use your QR code scanners from phone/iPad to access the Apple/Android Apps)
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  27. 27. by Nirvik Mitter 27 Advertisements by
  28. 28. by Nirvik Mitter 28 IKEA and INTERMARKET SEGMENTATION In a market there are different people having different demand but despite that many shares a common need. In that case serving their independently will be a tedious job and it will consume more time and will require more utilization of resources. That group of customer requires to be segmented together so that it’s easy for the companies to target them and addressing their needs. Intermarketsegmentation is process where customerof similar needs and buyingbehaviour are formed into a group and segmented together so as to fulfil their need and serve them better. These segmentation are not constrained by the geographical location and the customers with the same needs can be segmented together irrespective of their geographical location. Thus, Intermarket Segmentation is about forming segments of consumers who have similar needs and buying behavior even though they are located in different countries just like IKEA which caters to the global middle class.
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  31. 31. by Nirvik Mitter 31 Core Competency by using the Product Strategy A broad product line, including multi-function and different style, can provide strong product uniqueness and help IKEA building up a good competitive advantage among the market. Besides, durable household is another main feature of IKEA, for example, the sofa can reach the number of pressure in hundreds thousands times and keeps the doors of cabinets to switch on and off in several decades which they will have the demonstration to prove the testing method and result to customer. IKEA provides the product in modular system, the design of each product is in high flexibility which can be ride opened the DIY (Do It Yourself) concept to customer. On the other hand, IKEA can let the customer bring all the furniture to home at the same time, customer can save the delivery cost and transit time. Also, IKEA can save the logistics and the warehouse cost which can achieve the win-win situation significantly.
  32. 32. by Nirvik Mitter 32 Core Competency by using the Promotion Strategy Build up a good brand perception to customer in both price and quality range. IKEA is not only providing the various products to customer, but also offer a total solution for home furnishing and a package of home decoration including design and construction. On the other hand, IKEA changes its catalogues every year which is another important element to let them promote their product in the fastest and easiest way to greatly increase their sales volume.
  33. 33. by Nirvik Mitter 33 Core Competency by using the Price Strategy IKEA will base on the low-cost design philosophy and method in order to design the product in lowest cost and let all range of people is affordable to buy. And they are using the flat packaging and continuous innovation on various products in order to reduce the cost. Flat packaging can save the warehouse area and reduce the defect rate. Moreover, it can greatly save the transportation for all parties.
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  36. 36. by Nirvik Mitter 36 Core Competency by using the Place Strategy IKEA will choose a large area to present their products and they are always through the unique Scandinavian style for presentation. Moreover, the showroom will be according to each theme or design style to divide each room within the shop. Besides, IKEA provides both of the Catering Services and Children Play Facilities which are the added value to the existing core business, it can be increased customer satisfaction and support the sales department.
  37. 37. by Nirvik Mitter 37 Ansoff's Product-Market Matrix By using the Ansoff's Product-Market Matrix to the case of IKEA, we found out that IKEA can expand their international design team in order to maintain the various products in Scandinavianstyle. On the other hand, they can reserve the flexibility for local adaption for diversified tastes, preference and requirements across the continental markets. As a result of Ansoff's Product-Market Matrix, IKEA is able to create a strong competitive advantage over the home decoration and furnishing market through offering unique and high differentiated products. "Unique Scandinavian Style, Local Taste Meets" Further Diversify - Business Integration strategy Backward Integration - IKEA has to control the manufacturing partners by means of various strategic collaboration including Merge and Acquisition or Strategic Alliances in order to primarily secure the production coherence and efficient supply. Forward Integration - Remove the intermediates at the forward side of supply chain bydirectly establishing own-controlled retail outlets is the way to maintain a high level of margin resources through manipulation of a major share of supply chain. Market Development in future IKEA continues to develop the new markets at international level in order to increase the quantity supplied. Therefore, facilitation an adjustment of economic production scale towards an optimal point IKEA can be also upgrade to the global brand that strengthens its market position of which any rivals are difficult to imitate and compete.
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  39. 39. by Nirvik Mitter 39 Advertising Agencies associated with the brand and covering all strategic brand campaigns - Timeline All the Ad Agencies who are/were associated with IKEA:  SMFB — a sister agency of Forsman & Bodenfors in Norway  Ogilvy & Mather, New York  Ogilvy Action, Dubai  Leo Burnett  DDB Berlin  Mother London  Deutsch, New York  Ogilvy Frankfurt  Jung Von Matt  Ketchum  SCPF  Crispin Porter + Bogusky  And a few more. . .
  40. 40. by Nirvik Mitter 40 In 1994, IKEA ran a commercial in the United States widely thought to be the first commercial featuring a homosexual couple; it aired for several weeks before being pulled due to bomb threats directed at IKEA stores. Watch the YouTube Ad here – http://goo.gl/xAmSE In 2002, the inaugural television component of the "Unböring" campaign, titled Lamp, went on to win several awards, includinga Grand Clio,Golds atthe London InternationalAwards and the ANDYAwards, and the Grand Prix at the Cannes Lions International Advertising Festival, the most prestigious awards ceremony in the advertising community.
  41. 41. by Nirvik Mitter 41 IKEA launched a UK-wide "Home is the Most Important Place in the World" advertising campaign in September 2007 using estate agent signs with the term "Not For Sale" written on them as part of the wider campaign. After the campaign appeared in the Metro newspaper London the business news website www.mad.co.uk remarked that the IKEA campaign had amazing similarities with the marketing activity of UK home refurbishment company Onis living who had launched their own Not For Sale advertising campaign two years prior and was awarded the Interbuild 2006 Construction Marketing Award for best campaign under £25,000. Adding some spice to theAd World of IKEA -A debate ensued between Fraser Patterson, Chief Executive of Onis and Andrew McGuinness, partner at Beattie McGuinness Bungay (BMB), the advertising and PR agency awarded the £12m IKEA account. The essence of the debate was that BMB claimed to be unaware of Onis's campaign as Onis were not an advertising agency. Onis's argument was that their advertising could be seen in prominent landmarks throughout London, having been already accredited, showing concern about the impact IKEA's campaign would have on the originality of their own. After some negotiations BMB and IKEA agreed to provide Onis with a feature page on the IKEA campaign site linking through to Onis's .co.uk site, for a period of 1 year. Onis is possibly the only company to have ever been advertised by IKEA in such a fashion. In 2008, Onis Homes limited was placed into voluntary liquidation and the website www.onishome.com closed. The Intellectual Property and trading rights of Onis Homes Limited were later purchased by new shareholders with the strategy to grow the Onis brand throughout the U.K. as a one stop shop home refurbishment franchise using the trading name Onis living.
  42. 42. by Nirvik Mitter 42 In 2008,IKEApaired up with the makers of popular video game The Sims 2to makea stuff pack called The Sims 2IKEA Home Stuff, featuring manyIKEAproducts.It was released on24June 2008 in NorthAmerica and 26 June 2008 in Europe. It is thesecondstuff pack with a majorbrand, the firstbeing TheSims 2 H&MFashion Stuff, which are both coincidentally companies of Swedish origin. IKEA has taken over title sponsorship of Philadelphia's annual Thanksgiving Day parade in 2008, replacing Boscov's, who filed for bankruptcy in August 2008. In November 2008, a subway train decorated in IKEA style was introduced in Novosibirsk, Russia. Four cars were turned into a mobile showroom of the Swedish design. The redesigned train, which features colourful seats and fancy curtains, carried passengers until 6 June 2009. Oyster cards (the ticket-free system for London Underground) were for a time given with wallets sponsored by IKEA who also sponsor the tube map.
  43. 43. by Nirvik Mitter 43 In January 2009, just before the new store opened in Southampton, the MV Red Osprey of Red Funnel was re-painted in an entirely yellow and blue livery to celebrate the opening of the new IKEA store in Southampton. This is the first time a Red Funnel ferry has been re-painted outof itsownred and white colour scheme. It stayed in these colours for 12 months as part of a deal between Red Funnel and IKEA to provide home delivery services to the Isle of Wight. It was repainted with Red Funnel's red and white livery when the deal ended in January 2010. The Isle of Wight ferry Red Osprey in her IKEA livery. In March 2010, IKEA developed an event in four important Metro stations in Paris, in which furniture collections are displayed in high-traffic spots, giving potential customers a chance to check out the brand's products. The Metro walls were also filled with prints that showcase IKEA interiors. In September 2010, IKEA launched an advertisement for UK & Ireland called "Happy Inside" which had 100 cats lying on IKEA furniture in the flagship IKEA store in Wembley, London.
  44. 44. by Nirvik Mitter 44 In April 2011, an advertising campaign for which aims to discover whether men or women are messier in the home launched. Created by Mother, the campaign will begin with a TV advert shot in front of a live audience, featuring four stand-up comedians, two men and two women, having the debate over which gender is the messiest. The strategy behind the campaign is that domestic clutter leads to arguments, leading to an unhappy home, which IKEA wants to prove can be avoided with better storage. Viewers will be directed to a new Facebook page for the brand, where they are able to vote as to who they believe is the messiest, and submit proof using videos and photos through an app created especially for the campaign. Meanwhile, online display banners will allow off users the opportunity to vote, with online adverts promoting Ikea products also demonstrating the problems people have shared, and offering solutions. Anna Crona, marketing director at IKEA UK and Ireland, explained: "We are committed to understanding how our customers live life at home so we can provide solutions to make life happier. Everybody has storage needs in the home and by encouraging debate and providing solutionswe will show that IKEA is relevant to everybody, no matter what your home is likeor how much money you have." Press adverts will also support the campaign, as will a handbook entitled "Peace, Love and Storage", which will be available through the Facebook site. In August 2011, IKEA launched a first advertisement for Thailand in Sukhumvit, Bangkok Metro station. The advertisement has shown a box and a manual of POANG product, and shown a slogan of company "A better everyday life at home".
  45. 45. by Nirvik Mitter 45 During the launch of the new catalogue in August 2012, IKEA toured with giant IKEA catalogue through the Netherlands. This giant catalogue was some kind of tent, inside were some new articles presented, coffee and snacks were served and you could get a catalogue with yourself projected on the cover. The IKEA catalogue was runby co-workers from the nearest store. The catalogue was in thecity centres of Rotterdam, Groningen, Amersfoort and Eindhoven.
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  47. 47. by Nirvik Mitter 47 Market Environment Including Sectoral & Industry Analysis Market Analysis: Market analysis is consisted by few important sub points which are:  Market size (current and future),  Market growth rate,  The profitability of a market,  Industry cost structure,  Distribution channels,  Market trends,  Key success factors. Each one of them has a specific meaning and states specific things which can be used in order to improve or to choose between two different markets. The goal of this market analysis is to determine the attractiveness of a market and to understand or even predict the opportunities and threats which are related to the strengths and weakness of the company.
  48. 48. by Nirvik Mitter 48  Market Size. The size of the market can be based on the present sales or on potential ones. The nominal GDP of United Arabic Emirates is estimated on $228.578 billion and that shows just high is the life standard in this county. The United Arabic Emirates (UAE) is rapidly, highly developed economy based on different socioeconomic indicators such as GDP per capita, energy consumption. Although the UAE is becoming less dependent on their natural resources as a main revenue source still an important role in this economy is played by the petroleum and natural gas exports. Recently, Dubai’s Emirates started to look for another source of revenue and they looked into sectors like tourism. The region is trying to have pulled the eye of the people, especially to the rich ones. The rapidly developing economy of Dubai and UAE is making almost each big brand, firm, company to make offices in Dubai and even headquarters.  The Market Growth rate simply means to extrapolate historical into the future. The GPD per capita in UAE is one of the highest in the world and if you take this into consideration that shows only what enormous buy power this country has. Of course like every other country and economy, the UAE was hit by the economic crisis and in 2009 a decrease of 4.0% in the GDP growth was reported. An important inflection for this point is that sometimes the growth can be predicted by studying and analyzing if in the past were invented similar products like the one that IKEA wants to implement and spread within the country and be as much profitable as possible. Also the life cycle of the product must be taken into, because of this rapidly ever changing world a product could be on the top today, but the day after to be forgotten and new product can arise.  Market Profitability. And here while different firms can have different levels of profitability, to understand how much money you can make in a certain market the needed thing here is, the average profit potential of a market and that can be used as a guideline to understand the potential of this certain area. To do so here are used the 5 forces that Michael Porter created. Known as the Porter’s five forces they identify the influence on the market profitability and they are Buyer and Supplier power, Barriers to entry, Threat of substitute products and Rivalry among firms in the industry. Universally accepted fact all around the world is that a woman must take care of the house and as we are familiar with IKEA policy, they offer flat pack furniture, home accessories and kitchen items in their retail stores all over the world.
  49. 49. by Nirvik Mitter 49 IKEA Value-Chain Analysis “Each step in the manufacture of a product or the delivery of a service can be thought of as a link in a chain that adds value to the product or service. This concept of a how business fulfils its mission and objectives is known as the value chain” The concept of Value-Chain analysis is introduced by Michael Porter (1985), who divides activities of the firm into two categories: primary activities and support activities. Primary activities are necessary elements for producing the products and offering services, and support activities assist businesses to become successful in the marketplace.
  50. 50. by Nirvik Mitter 50 The following tables represent an analysis of IKEA operations on the basis of Value-Chain analytical framework: Primary Activities
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  53. 53. by Nirvik Mitter 53 PEST Analysis - IKEA PEST is an acronym for Political, Economic, Social and Technological factors that affect businesses. “Sometimes PEST is extended to seven factors by adding Ecological, Legislative, and Industry Analysis; it is then known as PESTELI. However, these additional factors can be covered in the previous factors”
  54. 54. by Nirvik Mitter 54 Porter’s 6 Forces Power of Buyers: There is a little power because of the exiting low-price options. Furniture and other small items have an alternative and consumers have limited alternative choices that make the IKEA unique among its competitors. In addition the low price strategy is another way of the company to response in buyer‘s need. Power of Suppliers: IKEA has its thousands of suppliers that set standards in delivering the material. Once in a while, for someproducts, the IKEAbids for thecontracts with multiple companies to craft the same products. Most of the supplier work in IKEA and compete with other suppliers, and they have a little bargaining power. Because of the low-pricing, IKEA‘s profit margin also affects the price in raw material than by prices in labour. Rivalry: The IKEA‘s furniture competitors‘ offers different styles and functionality corning targets a new low cost in terms of furniture line; Cratel & Barrel offers a furniture in box which is subject in higher prices Ethan Allen aimed at a more upscale market; Wal-Mart is equipped in a big box furniture that is categorized under the general store must have items, but don‘t have much of a style. IKEA is the most successful in delivering the complete package for the customers that reflects on weak rivalries. Threat of new Entrants Threat of Substitute product & services Bargaining power of Suppliers Bargaining Power of Buyers Rivalry among existing firms Power of Relative stakeholder
  55. 55. by Nirvik Mitter 55 Substitutes: There is no specific product that can be a substitute for furniture but IKEA at least, have to keep up with the latest trends, to avoid becoming out of style. Another advantage is that through their cutting and leading technology, IKEA could copy any new style fairly and move each the product into its stores. New Entrants: Another furniture company is rolling on low-cost strategy and should compete with the IKEA as the excellent company in delivering the furniture and house wares. IKEA stores do not reach many small towns and this is an opportunity for the new competitors to move into small and midsize cities with smaller stores and less selection. But not easier in city because new entrants have to establish a vast supply chin and create a unique brand name. Relative power of stake holder: IKEA has being opened with all its stakeholders. This involves building trust through good communication with consumers, co-workers, key opinion formers and the press. Being sustainable is a central part of IKEA's image. IKEA S.W.O.T. Analysis
  56. 56. by Nirvik Mitter 56 Strengths:  Leading retailer of home furniture & furnishings  Strong global brand image  IKEA‘s vision (create a better everyday life for the many)  Global presence of more than 35 countries  IKEA has its own industrial group  Self -assembled furniture  Not a traditional furniture  20-40 % Low cost furniture than competitors and no extra Cost included  Effective Value chain & procurement  Less time services and carried away material  Product differentiation (product range)  Single global strategy  No wastage of material  Unique business model  IKEA work environmentally friendliness
  57. 57. by Nirvik Mitter 57 Weaknesses:  Stuck in the middle  D.I.Y. nature  Logistic cost  Detracting to attain organization plans.  The size and scale of its global business  No enough distribution channels  The problem of product recalls  Difficulties to understand different countries attitudes and tastes  IKEAs little transparency.  Store layout – a hassle for those who want a particular item only.  Swedish designs may not appeal to all American markets.
  58. 58. by Nirvik Mitter 58 Opportunities:  Opportunity to enter in broad market such as Asian market  To sustain in long run  Online orders or E-marketing  Increasing average growth up to 11%  Opportunity to create economic designs with existing workforce and designers  To involve every contributor in value chain in optimal manner  Focus on differentiated products for the Asian market  Continuing demand for low prices  Growing demand for products which do not harm the environment  for companies to use less water when making products and reduce their carbon footprint  Untapped markets (Midwest, Corporate…etc.)  Educate consumers on IKEA thru advertisements)  Increase online sales and Internet presence.  Use the popularity among young people to expand to college markets.
  59. 59. by Nirvik Mitter 59 Threats:  To sustain in the long run  To follow the strategies more than one for long run  Changing social trends  Market Forces - more competitors entering the low price household and furnishings markets. IKEA needs to reinforce its unique qualities to compete with these.  Environmental issues across the global  Traffic and poor transportation system  Economic crisis - the recession slows down consumer spending and disposable income reduces  Many competitors - Wal-Mart, home depot, pier.  Social trends – such as the slowdown in first time buyers entering the housing market. This is a core market segment for IKEA products.
  60. 60. by Nirvik Mitter 60 TOWS Metrics Analysis
  61. 61. by Nirvik Mitter 61 Competitor analysis including market shares and brand rankings as per inter-brand /super-brand etc.
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  67. 67. by Nirvik Mitter 67 Industry Analysis Western furniture history  The classical world---practicability & durability Ancient Greece, Roman, Turkey, Egypt  The dark ages--heavy, oak, ornamented with carved design  The Baroque and Rococo---the nineteenth century The transitional furniture Asian furniture history  China----carved wood and bamboo, heavy lacquers  Japan ----minimalist style, wood, high-quality craftsmanship Trends:  Color--bright color  Form --follow the nature  Materials--textured surfaces and transparent plastic  RTA--ready-to-assemble furniture Global issues  Global remaining forest  IKEA’s environment responsibility “IKEA does not accept timber, veneer, plywood or layer-glued wood from intact natural forests or from forests with a clearly defined high conservation value.”
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  69. 69. by Nirvik Mitter 69 Costing & Pricing analysis of brand portfolio
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  73. 73. by Nirvik Mitter 73 Consumer Behaviour and Brand ambassadors How IKEA seduces us:  A fashionista runs the place  They know what we want before we do  They keep it light and breezy  They trap us in that damn maze Fabolous, Sean Kingston, Trey Songz, Olivia Palermo, Joe Jonas, Alice Braga, and many many more . . . are IKEA’s brand ambassadors.
  74. 74. by Nirvik Mitter 74 IKEA Creates First Interactive Catalogue & Tracks Consumer Behaviour IKEA has just unveiled its first interactive catalogue--it's about time, right!? This interactive site will include video content instead of just still imagery as well as the ability to interact with social media, including Pinterest and Facebook. While IKEA is spending a fairly large portion of their advertising budget on this one tactic, it will provide them with an immense amount of consumer knowledge and behaviour tracking. They'll be “able to monitor how people respond, the areas where they don’t respond, and look at how they’re using it, how many are using it and how it gets shared.” Very valuable learnings for any marketer!
  75. 75. by Nirvik Mitter 75 Brand repositioning campaigns (if any) and the reasons for it
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  83. 83. by Nirvik Mitter 83 Complexity of the Market Environment and the Key Business Challenges for IKEA IKEA has an effective business strategy that has been effectively implemented and this has ensured global leadership position for the company. This strategyconsistsof finding an effective combination of quality and prices for the products and thus appealing to a wide range of customers who mainly represent middle class in society. However, the current position of IKEA should not be taken for granted and there are specific set of challenges that need to be addressed by the company in an effective manner in order to remain competitive in the future and achieve long-term growth. The key business challenges faced by IKEA can be summarised into the following four points: 1. Keeping costs down. One of the major challenges faced by IKEA relates to the necessity of keeping costs down on the face of increasing prices of raw materials. Raw materials used by IKEA contractors for the majority products of the company involve wood and metal. The prices for both of these materials are increasing in global level and this fact causes difficulties for the company in terms of achieving its objective of lowering the prices by 2 to 3% annually. 2. Addressing cross-cultural differences in international markets. IKEA operates in more than 38 countries on the basis of both; company operated stores, as well as, franchising. The population in each of these counties have their unique culture and cultural differences find their reflection on various aspects of life including perceptions of value propositions offered by companies, the level reception and interpretation of various marketing materials and consumer preferences. This situation presents challenges for IKEA in terms of adapting various aspects of the business to local markets taking into account the cultural differences associated with each individual market. 3. Dealing with competition from China and India. Producers from new emerging superpowers, China and India present substantial threat to leading multinational businesses from US and Europe due to their significant competitive advantages in the forms of cheaper access to resources. Therefore, there is a risk for IKEA to lose the attractiveness of its valuepromise due to cheaper discounted furniture being offered to the marketplaceby Chinese and Indian companies. 4. Achieving flexibility for the business. IKEA has been growing in size for several decades as a result of aggressive international market expansion strategy. While the massive size of the company offers a number of substantial advantages such as economies of scale it has serious limitations as well. Namely, IKEAs massive size may negatively affect the level of flexibility of the company which is essential in current constantly changing marketplace. In other words, IKEA is faced with a challenge of remaining flexible and adaptable to rapidly changing marketplace, amid its massive size that slows down the speed of implementation of the proposed changes.
  84. 84. by Nirvik Mitter 84 Recommendations for the brand to achieve the TOM 1-2-3 status  Continued Expansion with Further Research  Ingvar Kamprad as Company Figure, not decision maker  Active Approach to Community Relations  Staffing Schedules  Catalogue Stores  In order to gain high market share in different country, IKEA need to emphasize a ― pull‖ marketing strategy by launching a campaign thatpromotes furniture as a fashion statement. By pull marketing strategy people will be aware of good quality furniture.  Asia is considered as emerging market and has largest consumers‘ base with more than three billion populations, IKEA need to build many stores in these countries to facilitate easy access to stores without time consuming.  For IKEA to have competitive advantage, they should design a web site which can help the customers to design their own furniture (customization), with the dimensions and the colors they need. This will give them large market segmentation that the customers would like to design their furniture.  IKEA is known by their stylish and affordable furniture retail business. So to sustain in this position IKEA need to upgrade its products continually based on costumers test and preferences. Long-term Recommendations: Design a furniture layout simulation in CD-ROM for each catalogue (need technology) --three-dimensional (3D) --pre-design at home --save shopping time
  85. 85. by Nirvik Mitter 85 More Recommendations for IKEA The current leadership and management practices in IKEA are promoted by the corporate culture that has been laid by its founder Ingvar Kamprad. There have been some modifications in corporate culture and management style since Ingvar Kamprad retired from the leadership position in 1986, nevertheless the impacts of his autocratic leadership style have lasted until present days and effects current leadership and management practices in IKEA. This statement can be justified by the fact that Ingvar Kamprad still serves as a senior adviser to IKEA and wields great influence to the company managers in various levels. While autocratic management style can still be highly effective in present days, for instance, in the case of Steve Jobs of Apple Corporation, generally, this style of management is widely criticised by business researchers and practitioners for a number of serious shortcomings. Specifically, the increased level of criticism associated with autocratic management style relates to low employee motivation and morale, high level of dependence on the competency of one or few people, and the lack of innovation. IKEA has a great potential in present day to increase its effectiveness and obtain competitive advantages in various levels thorough changing the management style practiced in the company from autocratic to democratic. “As the name implies, a democratic management style gives employees a much greater say in decision making. Rather than making unilateral decisions and expecting employees to carry them out, the democratic entrepreneur encourages employees to get involved in the process”. Embracing the democratic management style will offer IKEA numerous advantages such as highly motivated workforce, valuable insights to existing issues and innovative ideas for improving various business processes.
  86. 86. by Nirvik Mitter 86 A Rationalised Improvement Plan for IKEA As it has been shown above, the rationalised improvement plan for IKEA directly relates to the change of leadership and management style from autocratic to democratic. Such a dramatic and fundamental change within IKEA needs to be implemented in an effective manner in order to eliminate the chances of negative implications of the change on various business processes. Burke-Litwin model of organisational change can be employed in order to ensure successful implementation of proposed changes in IKEA. “According to the Burke-Litwin model of change, planned change flows from top (external environment) to bottom (performance). The arrows that point downwards are given more casual weight. Thus, with respect to organisational change, external environment has the greatest impact. Inside the organisation, the transformational factors have the greatest impact”
  87. 87. by Nirvik Mitter 87 Ingols et al (2011) divide the variables within Burke-Litwin model of change into two categories: transformational factors and transactional factors. Accordingly, environment, leadership, mission and strategy and culture are considered to be transformational factors, whereas, all the remaining variables are transactional factors. “Transformational factors “entail significantly new behaviour by organisational members and major alterations to other variables in the model. However, when fundamental reorientation and re-creation are a necessity, they may represent the only viable approach to organisational rejuvenation and long-term success”. According to the model the proposed changes in IKEA should be promoted from the top to the bottom. Specifically, strategic level management in general and IKEA Group President and CEO Mr. Mikael Ohlsson in particular should promote the new democratic style of management to be integrated into the corporate culture. This can be achieved through appointing a change agent, ideally Mr. Ohlsson to lead by example and to demonstrate the advantages of democratic management style in a practical manner. Moreover, in order to increase the level of effectiveness of change management the proposed democratic style management should be integrated into mission statement and strategic plans of IKEA, the company’s organisational structure, as well as, its systems and policies. In this way the work climate within IKEA can be improved in a desired manner and individual needs and values can be altered to appreciate and embrace the principles of democratic management system.
  88. 88. by Nirvik Mitter 88 Current Situation within IKEA Affecting the Implementation of Rationalised Improvement Plan The plan proposed above that mainly involves changing autocratic management style to democratic management offers the potential of dramatically improving IKEA’s prospects. However, an in-depth analysis of the current situation within IKEA reveals several areas of weaknesses associated with the proposed plan. Firstly, Mr. Ingvar Kamprad still has a major influence on company employees in his capacity of the founder of IKEA in his position of senior advisor to the CEO. This fact might defer the proposed changes from taking place because Ingvar Kamprad might see these changes unnecessary and even violating the basic principles of leadership that has ensured the achievement of the current status for IKEA. Secondly, the current team of senior level management of IKEA – Mr. Mikael Ohlsson President and CEO; Mr. Soren Hansen, Vice President and Chief Financial Officer; Mr. Goran Grosskopf, Chairman of the INGKA are performing well in their current positions according to the financial performances of IKEA. As such, the proposed plan of changing the management style in IKEA might be perceived as unnecessary by them as well. In other words, the current team of senior level management in IKEA may fail to appreciate the advantages of democratic management style, being deceived by their current high level of performance and taking current leadership position of the company for granted.
  89. 89. by Nirvik Mitter 89 Alternative Options for IKEA Alternative approaches need to be developed for IKEA that would address the above mentioned weaknesses of the proposed plan. The most appropriate alternative approaches available for IKEA can be summarised into the following points: 1. Promoting and implementing inspirational management style. Because it has been revealed that the implantation of democratic management style in IKEA might prove to be highly challenging due to above specified reasons, the most suitable ‘second best’ alternative would be the promotion and implementation of inspirational management style. The advantages of inspirational management style include high level of performance from the workforce through motivating them with an effective combination of tangible and intangible motivational tools. The implementation of inspirational management style is going to face less opposition within various management ranks in IKEA compared to the implementation of democratic management style because the latter style is associated with less changes and disadvantages compared to the former. 2. Devising a plan for implementing democratic management style over a longer period of time. IKEA founder Ingvar Kamprad and the strategic level management team might be more receptive to the idea of implementing democratic management style over longer period of time through devising relevant programs and initiatives because implementing the proposed changes in such a manner would not involve dramatic changes in a short period of time, and thus may not contradict to established principles and norms within the company.
  90. 90. by Nirvik Mitter 90 Recommendations for IKEA to Address Major Challenges Firstly, focusing on using recycled materials. The awareness of population who are the current and potential customers of IKEA about various environmental issues is increasing due to the activities of various non-government organisations and wide coverage of these issues by the media. One of the most discussed environmental issues in a global scale relates to deforestation in various regions and its negative impacts for the future of the nature and humanity. As a result, the demand for the various types of products such as paper and plastic bags made of recycled materials has dramatically increased. This change in consumer preferences presents good opportunity to IKEA to promote research and development initiatives among its suppliers with the aims of introducing furniture and other types of products in the marketplace that are made of recycled wood and other recycled materials. Having followed this advantage IKEA would possess the first mover advantages in the market of recycled furniture and in this was the company would be able to further strengthen its position in the marketplace. Secondly, engaging in product differentiation. There is an opportunity for IKEA to dramatically increase its revenues through engaging in product differentiation. IKEA is recommended to follow the strategies of Argos and Tesco where the offerings of products and services range from international calling cards to various types of insurances and loans and accordingly they have greater potential for increased amount of revenues. IKEA already has a firmly established effective strategy and infrastructure and these can be used in order to increase the product ranges of the company in an effective manner. Thirdly, engaging in market expansion in an international level. IKEA is also recommended to increase its revenues through engagement in market expansion strategy in an international level. Specifically, the company is recommended to enhance the level of its presence in Eastern European and Central Asian region. Markets in countries where IKEA is currently operating has become saturated, and from this perspective international market expansion would make a good business sense for IKEA.
  91. 91. by Nirvik Mitter 91 Factors that Might Influence Implementation of Recommendations Specific factors may affect the implementation of recommendations formulated above. Some of the most important factors of this nature are described below. 1. Possible global financial crisis. In the case of another global financial crisis some of the above formulated recommendations that relate to product differentiation and international market expansion would have to be deferred for the later period of time. This is because financial crises are usually associated with decline in sales for most types of products and services and uncertainty in the marketplace and IKEA management would consider it inappropriate to invest in product differentiation and market expansion in such an environment. 2. Regulations in Eastern European and Central Asian countries. Rules and regulations might be introduced by the some governments of Eastern European or Central Asian countries that can make it highly challenging or even impossible for IKEA to launch operations in within those countries. Such activities by the governments can be initiated for the reasons of protecting local businesses.
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  93. 93. by Nirvik Mitter 93 What is the future of this brand?
  94. 94. by Nirvik Mitter 94 IKEA Trivia
  95. 95. by Nirvik Mitter 95 IKEA Advertisements IKEA Ad Watch at – http://goo.gl/HnhRZ IKEA smallest store Watch at – http://goo.gl/SJ4vQ IKEA catalogue 2013 Watch at – http://goo.gl/o1anp
  96. 96. by Nirvik Mitter 96 Final Conclusion IKEA is a well-known global brand with hundreds of stores across the world. In order to improve performance, it must assess its external and competitive environment. This will reveal the key opportunities it can take advantage of and the threats it must deal with. IKEA responds to both internal and external issues in a proactive and dynamic manner by using its strengths and reducing its weaknesses. Through this, IKEA is able to generate the strong growth it needs to retain a strong identity in the market. IKEA's passion combines design, low prices, economical use of resources, and responsibility for people and the environment. The company's products, processes and systems all demonstrate its environmental stance. For example, clever use of packaging and design means more items can fit into a crate, which means fewer delivery journeys. This in turn reduces IKEA‘s carbon footprint.
  97. 97. by Nirvik Mitter 97 References • Competitive Strategy: Techniques for Analyzing Industries and Competitors Michael E. Porter • Competitive Advantage: Creating and Sustaining Superior Performance Michael E. Porter • Thompson, AA Strickland AJ & Gamble J 2005. Crafting andExecuting Strategy (Fourteenth Edition), McGraw-Hill, New York, pp. C2-C32. • Anonymous ¡¥IKEA strategy targets big/bigger/best stores¡¦, DSN Retailing Today; Nov 8, 2004; 43, 21; ABI/INFORM Global, p. 28 • K. Klingand I. Goteman, 2003 ¡¥IKEA CEO Anders Dahlvig on international growthand IKEA¡¦s unique corporate culture and brand identity¡¦, Academy of Management Executive, Feb 2003, Vol. 17, • Needles, BE, Powers, M & Crosson, SV, 2007, Principles of Accounting, Cengage Learning • Porter, ME, 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press • Profile: IKEA, 2011, Innovation Leaders, Available at: http://fp05- 527.web.dircon.net/ikea_company_profile.htmL Accessed, July 1, 2011 • Berger, A, 2011, Operations Management: IKEA, Grin Verla • Inter IKEA Systems B.V., 2011, Available at: http://franchisor.ikea.com, Accessed July 1, 2011 • Janakiraman, B & Gopal, RK, 2007, Total Quality Management: Texts and Cases, John Wiley & Sons • Kishel, GF & Kishel, PG, 2005, How to Start, Run, and Stay in Business: The Nuts-and-Bolts Guide to Turning Your Business Dream Into a Reality, 4th edition, John Wiley & Sons • Martins, T, 2010, Ingvar Kamprad Quotes: Business Leadership Advice from IKEA’s Founder, Available at: http://www.strategicbusinessteam.com/famous-small-business-quotes/famous- business-and-leadership-quotes-from-ingvar-kamprad-founder-of-ikea/ Accessed July 10, 2011 • Mullins, LJ, 2005, Management and Organisational Behaviour, Prentice Hall • Pride, WM & Ferrell, OC, 2008, Foundations of Marketing, Cengage Learning • Profile: IKEA, 2011, Innovation Leaders, Available at: http://fp05- 527.web.dircon.net/ikea_company_profile.htmL Accessed, July 1, 2011 • Rothacher, A, 2004, Corporate Cultures and Global Brands, World Scientific • Welcome Inside, 2010, IKEA Group, Available at: http://www.ikea.com/ms/en_CN/about_ikea/press/press_releases/Welcome_inside_2010.pdf Accessed July 10, 2011 • Applegate, E & Johnsen, A, 2007, Cases in Advertising and Marketing Management: Real Situations for Tomorrow’s Managers, Rowman & Littlefield WEB SITEs:  http://www.thetimes100.co.uk/case-study--swot-analysis-sustainable-business-planning--110-368- 1.php  http://www.IKEA.com/ms/en_US/about_IKEA/pdf/sustainability_Report_2010.pdf  http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html  http://www.theofficialboard.com/org-­­chart/ikea  http://www.ikea.com/ms/nl_BE/pdf/yearly_summary/Welcome_inside_2010_update.pdf  http://www.slideshare.net/OsamaAlbarrak/ikea-strategic-case-study  http://www.euromonitor.com/inter-ikea-systems-bv-in-retailing/report  http://www.thestrategyweb.com/  http://www.businessteacher.org.uk  And a lot more. . . . . . . . .

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