19BSP3787_prabhat kumar

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Introduction

IKEA, a Swedish company founded in 1943, was known for selling inexpensive, well-designed, self-
assembled furniture to the masses. The company was also known for following Scandinavian culture and
business practices wherever it expanded.

As the company sold furniture of similar sizes and shapes around the globe, it had a maximum two
percent variation in the range it stocked in its stores

The caselet, IKEA: Taking the Customization Route, deals with the challenges faced by IKEA, a furniture
retailer, while entering into a number of markets around the globe. IKEA had strong reservations in
customizing its product offerings to suit the tastes of local markets. The company initially refused to
make major changes in its products when it entered the US market. However, when it faced consumer
indifference, it decided to customize some of its offerings to suit the needs of the US market. The caselet
also gives inputs on how IKEA operated in other markets.

Issues:

How an organization tries to maintain a balance between standardization and customization of its
product offerings

The challenges faced by a company while getting into a new market

The ways in which a company customizes its offerings to attract the target market

IKEA learning capability also helps it to flourish in furnishing market. They appreciate local taste and
make their product according to consumers’ needs. As they have change their small glasses into big
glasses for U.S. market. Same as they have done in Hispanic market, IKEA find out the Hispanics behavior
towards shopping and understand their attitudes, then make their store according to Hispanics’
requirement such as add seating and dining space, brighten the color palettes, and hang more picture
frame on the walls. IKEA have 264 stores around the world the still many growth opportunities are
remain untouched which they are planning to avail them.

SWOT Analysis

Opportunities

• U.S.A. economy is moderately reasonable.

• IKEA is doing reasonably good in implementing the concerning laws and legislation.
• IKEA is equipped to internalize new technology.

• IKEA international environments are reasonably contusive.

Threats

• U.S.A. is experiencing social shift in the area of doing cultural and social at large is becoming moral
savvy.

• Legislations are in variably passed including related to business.

• Technological innovations happing frequently.

Strengths

• IKEA is maintaining formidable positions against their competitors.

• The suppliers are friendly and they are lasting after IKEA interest.

• The company is maintaining good company relationship with labor.

• The company is financially sound.

• IKEA is operationally design on sound standards.

Weakness

• IKEA is needs significant improvement to help understand the consumer behavior of diversified
group/subgroup.

• Consumers are pretests in their pursued of seeking value in the transaction.

• Competition is fiercer among the retailing business.

• Vision and mission and long term objectives needs rethinking and improvement. • IKEA needs
improvement in marketing management particularly in U.S.A.

• HRM policies procedures demand rethinking and designing the HRM on contemporary line.

IKEA marketing/consumer behavior objectives from 2006 to 2007 in U.S. market are;

• To increase in revenue from 22.2 billion to 28.6 billion.

• To increase market share from 18% to 28%.

• To increase ranking from 96 to 90.

• To increase sales from 2.78 billion to 4.2 billion.

• To enhance IKEA brand name in consumers mind.

• To expand IKEA retail stores from 19 to 38.

• To maintain local customers’ taste about home furnishing.

Market Segmentation

IKEA has segmented their market on the income, geographic, product-usage, and brand-user bases. As
it’s target market are place at middle-lower and lower class, where income level is quite low and this
segment of the market are usually lives in suburban areas of the country. The U.S. economy is
moderately reasonable, so IKEA need to capture this economical advantage by using extensive
marketing strategy in their distribution channel and it’s financial position also very good which permit
IKEA to expand its operations to others urban and suburban areas. On the other hand, segmentation
based on usage of the product, IKEA products are furnishing related which are based on low price so
they offer much verity in it and also take new innovation by effectively utilizing their technical skills.
Through making them known in the furnishing market, IKEA develop their customer brand loyal. Hence,
they can segment their market on loyalty bases as its competitors namely Target and Pier 1 Import are
also making their profit. So, IKEA need to focus on how to make non-loyal customer loyal and this
require buyer-seller relationship. As the competition in retail business is increasingly fiercer which IKEA
can respond to it by best margin to retailers who will try to sale IKEA’s products.

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Targeting this segment helped IKEA project itself as an aspirational western brand. This was a
massive change in strategy, as IKEA was targeting the mass market in other parts of the world.

IKEA also had to tweak its marketing strategy. In most markets, the company uses its product
catalogue as a major marketing tool. In China, however, the catalogue provided opportunities
for competitors to imitate the company's products. Indeed, local competitors copied IKEA's
designs and then offered similar products at lower prices. IKEA decided not to react, as it
realised Chinese laws were not strong enough to deter such activities. Instead, the company is
using Chinese social media and micro-blogging website Weibo to target the urban youth.

IKEA also adjusted its store location strategy. In Europe and the US, where most customers use
personal vehicles, IKEA stores are usually located in the suburbs. In China, however, most
customers use public transportation. So the company set up its outlets on the outskirts of cities
which are connected by rail and metro networks.
IKEA marketing strategy is based on sophisticated customer research and market research.
“IKEA actually sends design experts into people’s homes to listen to their concerns and provide
feedback. This allows IKEA evangelists to make marketing decisions based on people’s real-life
experiences rather than just surveys or data. Accordingly, it can be argued that marketing
strategy of IKEA is proactive, rather than reactive.

Generally, IKEA marketing strategy integrates the following:

Focusing on product and price elements of the marketing mix. Specifically, IKEA attempts to
offer the greatest range of products for the lowest cost. Along with product and price,
additional elements of marketing mix, also known as 7Ps of marketing include place,
promotion, process, people and physical evidence.

Using mono-segment and adaptive types of product positioning. The furniture retailer targets
cost-conscious customer segment that prefers to get value for money they pay. Accordingly,
IKEA has adapted the lowest costs of its products along with the widest range as the unique
selling proposition of the brand.

Integrating several channels of marketing communication such as print and media advertising,
sales promotions, events and experiences, public relations and direct marketing. Specifically,
the furniture giant derives the maximum benefits from print and media advertising and direct
marketing.

Effectively applying product placement marketing technique. Movies such as Fight Club, Cash
Back, 500 Days of Summer and TV programs such as 30 Rock: Blind Date, Being Human (UK):
Ghost Town and Little Britain can be mentioned as the most notable cases of product
placement by IKEA.