IKEA's current strategy focuses on standardization across international markets while also adapting products locally. The document recommends IKEA continue expanding internationally, with tailored strategies for key markets like the US, Japan, and Russia. For the US, it suggests better store placement and integrated marketing. For Japan, changes to consumer behavior, customized offerings, and delivery/assembly services. For Russia, partnerships are advised due to administrative hurdles and economic instability. Overall, the recommendation is for IKEA to improve its successful global standardization strategy while enhancing local responsiveness.

1. EquipeTrois: Ikea

2. Outline Introduction IKEA Value chain IKEA Current strategy Alternative strategies Recommended Future Strategy Conclusion

3. IKEA: Introduction.-

4. IKEA Facts and Figures IKEA founded in 1943 First store opened in 1958. First stores outside Sweden were opened in Norway (1963) and Denmark (1969). The 1970s, spread of stores to other parts of Europe. As of May 2010, the chain has 313 stores in 37 countries, most of them in Europe, North America, Asia and Australia. 2006: opening of 16 new stores. A total of at least 15 openings or relocations are planned for 2010. The only two Asian countries that IKEA group owns stores are in Japan and China.

5. IKEA financial performance Sales (billions $) Years

6. Success factors High quality furniture that reasonably priced and readily available(cos leadership) Emphasing simplicity, durability and safety Its standardized strategy of internationalizing minimized costs Marekting mix (catalogues, stores…) excellent international procurement excellent supply chain management and IT infrastructure

7. The Traditional Value Chain Model Primary Activities Secondary Activities: Infrastructure; Logistics; H.R; Technology and Information systems.

8. IKEA’s Hybrid Value Chain IKEA’s value chain is characterised by it’s adaptation of traditional primary and secondary activities: Research & Development Procurement/Supplier activity Human Resource Management and Logistics Company and Store Infrastructure Role of the customer

9. 1.Research and Technology Development In-house design team with high degree of independence from H.Q. control. Always searching for cheaper materials; suppliers chosen in international markets because of their proximity to exploitable resources: driving down costs, increasing chances of competitor advantage. Research into competitor products . Technology transfer to suppliers.

10. 2. Suppliers, Production and Procurement Strong relationships and control over suppliers allows for rapid and adaptive production. Customers become part of the production process, they are suppliers of transportation, assembly, information and labour. Select sites for international expansion based on the location of suppliers, raw materials and low cost supply chains in host nations. Sourcing from long term suppliers, (30-50% cost reductions). Standardization of products across international markets = economies of scale. Flat pack production = low shipping costs from suppliers to stores.

11. 3. Human Resources Education of employees: frugality Engrained in corporate DNA. Smaller in-store staffing levels. Centralized control of all subsidiaries and firm control over long term suppliers. 4. Logistics Year round stocking = ample on-site inventory. Warehouses adjacent to stores. Very low shipping and transport costs (flat packs and self-assembly). Locations for subsidiaries are chosen due to their proximity to local supply channels and natural resources. Centralization of management ensures efficiency of logistics process: umbrella control.

13. Circular layout with marked path to guide customers to see all products,

14. Crèche service,

15. Restaurant at centre of store.5. Store Design & Customer Service Limited in-store staffing. Self-selection by customers. Suburban locations with ample car parking space. Roof racks for sale with promise of refund upon next visit. Reference catalogues and internet inventory service. Ease of transport and assembly i.e. flat pack, modular design.

16. The IKEA Hybrid Value Chain Marketing Dept. Store Adaptation & Customer Service H.R. Umbrella Control Efficient Logistics Transfer of Tech. Internal Suppliers IKEA H.Q. managed inventory system Bids, competition and production. R&D and forecasting Product design Distribution Centres; efficient supply channels Stores Customer External Suppliers Supply Chain (under the control of IKEA HQ) IKEA of Sweden IKEA of Sweden

17. The IKEA Value Chain’s Core Adaptation? Answer:Integration. Value Value

18. Cost Advantage Activities Integration of the customer into the value chain. Customer is a supplier of: time, labour, information, transportation. International subsidiaries placed in ‘low-cost’ nations. Self-service customer model: limited staffing. Self-assembly by customer = lower production costs. Warehouse adjacent to show room. Flat pack, unassembled products – lower national and international shipping costs. Sourcing from long-term suppliers = greater bargaining power. Standardization of products across international markets = benefit from economies of scale. Use of inexpensive materials, innovation in design and R&D.

19. Differentiated activities R&D: complete autonomy of design teams from central HQ: encourages total innovation to produce unique, quality, stylish designs. Conversion of suppliers into ‘customers’. They are recipients of: Technology Equipment Information The integration of the customer into customer service/ production/supplier activities. Adapted customer service and store facilities: Limited staff Crèche. Restaurant. Wide aisles for high traffic levels. Easy transport and assembly. Circular store design, marked path through store.

20. Analysis of IKEA’s International Expansion

21. IKEA: The Global Standardization Strategy

22. Differences in Customer Preferences

23. American tastes: Bold colors vs subdued colors Beds measures Short curtains European tastes:

24. European Dining Habits Dining tables , sofas for more than 2 person Vases instead of glasses Hispanic families in America

25. IKEA New strategy: Cost efficiency Locally response Transnational Strategy IKEA relies on Standardization of products with global production and distribution, but also has new designs for local markets.

26. Which Strategy Would WeRecommend. Why?

27. 1. External and Internal Analysis

28. Porter’s Five Forces Analysis

29. P.E.S.T.L.E. Analysis Political It depends on country cultures such as in the case of China: pricing , high duty rates and PRC bureaucracy Economic The recession Globalization (integration) and national responsiveness ( differentiation ) such as in China case Economies of scale such as buying bulk at cheaper unit costs Social Creating opportunities for employees Support for charities such as the World Wildlife Fund, UNICEF and Save the Children Technology Quality technology Communication Legal Applicable laws and regulations applied through factories inspections Environment Environmental activities Responsibility to environment

30. SWOT for Current Strategy

31. 2. Strategic Options and Evaluation

33. Alliances: greater emphasis on joint ventures and strategic alliances represent possible vehicles to further build on IKEA's focus strategy.

36. Correct Placement of Stores Select cities in middle America and the East Coast instead of focusing only on California . E.g. Denver, Colo., Austin, Texas, and Atlanta and Georgia. Concentrate more on college areas, especially metropolitan colleges and universities.

37. 2.Strong integrated marketing Communications plan The integrated marketing plan needs to be bold, clever and innovative Encourage consumers to use their furniture as a fashion or style statement – this mindset will bring consumers into IKEA who want both function and form, which are two of IKEA’s strengths. This will also encourage consumers to change their furniture or home accessories, as the styles and fashions change. Using catalogues targeting the American customer preferences

38. Implementation in… …the Japanese market

39. Japanese market Change the behavior of the Japanese in the furniture market, making them willing to accept the IKEA concept, i.e. education. Gather market knowledge, especially market specific knowledge, i.e. do surveys in order to understand customers and cultural pattern of the Japanese. Home delivery and ‘at-home’ assembly service, (extra charge). Select the appropriate furniture for Japanese consumers.

40. Japanese market continued… proposing the new ways of decorating houses in order to suit Japanese taste even they needed to Adapt packaging and advertising to the Japanese consumer behavior Providing customized catalogues suiting the Japanese tastes and preferences Focus more on quality and production of goods to suit small spaces.

41. The Russian Market Possibilities: • Russia is one of the markets with the biggest potential : very little competition. • Moscow is a fast growing metropol where more and more people can afford IKEA furniture. • Any foreign brand is considered luxury.

42. Russian Market continued… Constraints: Administration is very inflexible; to open a new shop takes time. Prices for sites are very high. Duty for imports are about 25-80%. Inflation in Russia is over 15% a year. The future economic development of Russia is very insecure.

44. Access to raw materials needed, (wood, oil, steel).