1. Executive Summary
This paper reviews IKEA’s development and entry into the US Furniture Retail Industry. At the
time of its entry, the market was very fragmented with the top 10 furniture retailers representing
only 14% of the market share. The industry was segmented in two categories low-end and high-
end retailers. This report outlines the strategies utilized by IKEA which positioned it to become
the world’s top furniture retailer in 2002, despite major point-of-differences (POD) in its
marketing mix compared with its competitors. IKEA’s success came after overcoming a number
of challenges including: specification issues and general dislike of product attributes, changing
American’s mind-set of purchasing furniture to last a lifetime, meeting different consumer
preferences and needs in order to increase its market share.
The company targeted: price sensitive consumers, families with children, persons who were
frequent travellers, risk-takers, early adopters of technologies and do-it-your-selfers. Its
marketing mix comprised of a product portfolio of 10,000 colourful products compared to
traditional black, brown and white colour furniture used by its competitors. Products were priced
using a ‘price/product matrix’ at 30% to 50% below of its competitors. IKEA operated 14 stores
in sub-urban areas, with plans to expand to 50 stores by 2015. Its promotions focused on using
high gloss catalogues and television advertisements with an emotional appeal to change the
Americans mindset through its “Unboring” campaign. IKEA’s strategies resulted in them
doubling revenue by mid 1990s and increased revenues from US$600 million in 1997 to
US$1.27 billion in 2001.
A Pestel analysis indicates that IKEA has made a good decision in entering the US, despite not
being recession proof; the country is politically stable, technologically advanced and supports
foreign direct investments. The US Furniture Retail Industry is one with strong rivalry and strong
buyer power. However, pressure from suppliers is low and there is moderate threat from new
entrants. A Swot of IKEA indicates that their business strategies and competencies in design and
product development make them a strong competitor in the $67 billion industry.
This report concludes by looking at where IKEA is in 2016, potential next steps and key
learnings from the case. Based on the foregoing, the recommendation is for IKEA to increase its
market share in the US through geographic expansion across more states using its current
strategy. This approach coupled with advertising and ongoing market research will see IKEA
increasing its market share and maintaining its positions of dominance in the Industry.