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1/ IKEA’s EXTERNAL ANALYSIS

OPPORTUNITIES THREATS
POLITICAL ENVIRONMENT

ECONOMIC ENVIRONMENT
 Low income clients which are a potential
interesting target for IKEA .

SOCIO CULTURAL ENVIRONMENT
 The intergenerational transmission of
traditional furniture is lost
 New generations are attracted to the concept
of “ quality design at a low price”
 Changing life styles and private consumption
which now have more time to receive guests.
 A lot of people live in small overcrowded
apartments
Confidence of fresh internet users for online
purchase
 All strata of population could be interested
by the IKEA’s products.
 Popularity of Scandinavian style combining
strength and simplicity.
 Sleek style’s popularity

TECHNOLOGICAL ENVIRONMENT
 Benefits of new technologies particularly
Internet that has allowed Ikea to enter the top
20 commercial sites.
ECOLOGICAL ENVIRONMENT
  Deforestation
LEGAL ENVIRONMENT

THREAT OF NEW ENTRY (low)

 High barriers to entry

COMPETITIVE RIVALRY(medium)
 Oligopolistic markets  Competition of the tradition furniture
industry
 Competition of low cost companies such Fly
and Conforama

2/ IKEA doesn’t operate in a vacuum . It’s an open company since it could be considered as an open system in
interaction with its environment. Indeed, It elaborates its strategy according to the opportunities and threats of
the environment to adapt itself. This adaptation ensures its survival and long term performance.

3/ The segmentation criteria used by IKEA are:( demographic and psychographic)

 Income level

 Age

 Family life cycle ( new young families)

 Lifestyles…

4/ COMPETITIVE STRATEGY (not included in the midterm)

 

 
 
 
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage
are varied and depend on the structure of the industry. They may include the pursuit of economies of scale,
proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and
exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an
above average performer in its industry, provided it can command prices at or near the industry average.
 
2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely
valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and
uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.
 
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser
selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of
others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in  (b) differentiation focus a firm
seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a
focuser's target segment and other segments in the industry. The target segments must either have buyers with
unusual needs or else the production and delivery system that best serves the target segment must differ from
that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.
 
References
 Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York.
 

IKEA: more than low prices

IKEA combines low prices ( cost leadership) + design and quality ( Differenciation)

IKEA customers are actively involved in the shopping experience. Its concept relies on customers to choose,
collect, transport and assemble IKEA products themselves. Customer involvement contributes to IKEA low
prices. That is the idea behind: "You do your part. We do our part. Together we save money."

5/ Marketing mix of IKEA company

PRODUCT

We can find at IKEA all what you need for home.

The variety of products at Ikea is wide.. The product depth is also immense with each product line having
further product extensions and product varieties. Its products combine design ,quality, strength and
simplicity

Ikea has a detailed list of product catalogue ranging from furniture items and fittings, to more sophisticated and
intricate assemblies to organize a variety of home furniture. Ranges exist in variety of categories, such as home
furnishings, furniture, bathroom fitments, kitchen fittings, book cabinets, closets, kid’s beds and other fittings,
home extensions and so on.

Price: The main strength of IKEA is low prices. Ikea does all what it’s possible to save money ( let
customers set up their furniture and leaving them to care delivery, convince customers to buy online….)

Place: The IKEA group is an International Marketing business, which sells furniture and accessories in Europe,
North America, Asia and Australia.

IKEA’s main business relates to its retail stores. Ikea doesn’t go through intermediaries; Ikea sells also through
its website

Promotion: IKEA has a long tradition in marketing communication focusing primarily on printed media
(catalogues) which has proven its values and success to the company over the years. Other media now being
used to an increasing degree include TV, radio, and internet based communication.
The promotions mix includes TV advertising, sponsorship, newspaper and magazine advertising, and many other
elements.

Obviously their iconic yellow IKEA logo serves to support the brand using attractive colors of the Swedish flag.
IKEA has developed an original communication caricaturing and mocking its own products in small
overcrowded apartments.

6/

Different conclusions can be drawn from the survey:

*IKEA has a good position in the market in terms of market share since 75;7% of the sample buy IKEA’s
furniture or decoration

* Strong reputation since IKEA is the first furniture company that comes to mind of 82.5 % of the respondents.
* It’s also relevant for IKEA to use a low price strategy. In fact, for 54.4% of the sample, the price is their main
motivation .

* The Word of mouth and advertising are very effective to increase the brand’s awareness.

* According to the consumer’s perception analysis , for the majority (78.6%), the quality of products is not
affected by price reduction.