IKEA Case study. An insight about IKEA establishment, history, success factors, product strategy, product pricing, store layout, services, SWOT analysis

1. Case Study

2. Agenda
IKEA
History
IKEA in 2010
Success Factors
Product Strategy
Product Price Matrix
Low price with Meaning
Store Layout
Services @ IKEA
Before IKEA
Invades America
Shopping @ IKEA
SWOT of IKEA
Good News

3. ELMTARYD Farm
AGUNNARYD Village
Ingvar Kamprad

4. 1943 – IKEA founded
1947 – Furniture added in product range
1953 – Furniture showroom opened in Almhult
1955 – Begins designing its own furniture
1956 – Begins testing flat packages
1958 – First store @ Almhult
1965 – Opened store @ Stockholm

6. Privately
held
Most
Valuable
Waste is
SIN
Save on
Electricity
Managers
travels in
bus
Pragmatic
Culture
First
name
basis
Cost
Cutting

7. Consumer Trends
Globe-Trotting
council members Product-strategy council NPD
Established Priorities for product line
Product developer set the
target retail pricing
Using “The Matrix”
Selecting ManufacturerIKEA engineers decide material
Selecting Designer IKEA in-house

8. Style
Price
Range
Scandinavian
(sleek wood)
Modern
(minimalist)
Country
(neo-traditional)
Young Swede
(bare bones)
High
Medium
Low
 Survey the competition to establish the benchmark
 Set price 30% - 50% as compared to its competitors
 Separate matrix for each product type
 To identify gaps in company’s product
 Identify market opportunities

9.  Focus on price
 Functional at best, ugly at worst
 Horrible design
 Adopted a more distinct design aesthetic
 Good design with reasonable price
 IKEA’s vision: “Democratic Design: Low Price with Meaning”
 Look all over the world for good suppliers, suitable raw materials
 Buy in bulk
 Do not charge the things that you can do it yourself
 Self service ware house, packed flat, assemble yourself

10.  Appealing shopping experience for customers
 Cavernous stores15000-35000 square meters
 Store layouts were carefully designed
 Route through path with decorated model bedrooms,
kitchens, living rooms & bathrooms
 Bright & inviting atmosphere
 Huge price tags, color-coordinated cards design tips
 Modern theme parks, child care centers

11. Swedish Meatballs
Theme Parks
Childcare Centers
In-house restaurants
Services @ IKEA stores

12. $ 67 billion sales in 2002
Highly fragmented
High promotions, low margins
Furniture Market
Case goods
Upholstered furniture
Bedding
Ready-to-assemble
Casual furniture
Retailer Type
Low-End High-End
General discount – Wal-Mart
Office supply – Office Depot
Discount warehouse – Costco
Aggressively promote
Smaller shops for price sensitive
Targeted college students
Environment & poor display
Poor sales assistance
Luxurious store environment
Affluence, prosperity & comfort
Single branded – Ethan Allen, Thomasville
Multiple branded – Jordan’s
Various payment options
High touch sales agents
Offer Interior design service
Huge inventories
Quality & Service
Delivery service
Wait of few weeks

13. First store in Philadelphia, 1985
Americans did not like its product
Launched high profile advertising campaign
Campaign called “Unboring”
“Lamp” award winning ad by Spike Jonz
1990  $ 600 million
2001  $ 1.27 billion
2002  US become the 3rd largest market of IKEA
14 stores, 30 million customers
In house restaurant become 15th largest food chain in US
Customer profile – Travel abroad, risk taking, like food & wine,
frequent flier, early adopter of consumer technologies
Problems @ US
Beds & kitchen cabinets did not
fit American sheets & appliances
Sofas were too hard for
Americans
Product dimensions are in cm
instead of inches
Kitchenware was too small

14. Before coming to IKEA store
Make a list of items required
Take measurements of space
Enough space in your car
@ IKEA store
Pencils
Paper
Measuring tape
Store guide
Catalogs
Shopping carts
Shopping bags
Strollers
Self-service
Expectation to customer
Transport their purchase to home
Assemble it at their own
Customer involvement
Product @ IKEA
10000 different products
Bold colors
Whimsical product names
Ex- Ticka alarm clocks,
Bumerang clothes hangers
Fniss Trash cans
Looking forward
50 stores by 2013
7th largest furniture retailer
Created unique niche

15. Strength
Flat packaging, Easier for customer
to transport
Strong brand recognition globally
Low cost furniture & house holds
Strong distribution network
across stores
Unique business model
Strong relationship with suppliers
Strong in-store experience
Weakness
Difficulty in understanding
American’s taste
“Unassembled furniture” does
not attract all customers
Lesser sales person for
customer service
Durability is low
Opportunities
Price sensitive target market,
college students
Suburban customers go for sleek design
Increasing market share in US
Emerging markets in Asia
Threats
Competing with big retailers like
Wal-Mart, Costco
Competing with high end specialty
stores like Ethan Allen,
Thomasville & Jordan’s furniture
Americans are less willing
to change their furniture

16. http://www.moneycontrol.com/news/business/swedish-retailer-ikea-
seeks-more-clarityfdi_700446.html

17. Thank You