Scope of Study

IKEA has established a reputation as a home furnishing specialist, offering a diverse range of
well-designed, functional solutions at an affordable price, which appeals to families with a
combined household income of RM2,000. Currently, it sells approximately 8,500 products
ranging from bedding to kitchen utensils, children's furniture, and textiles, as well as their
infamous sought-after meatball. However, for the purposes of this study, we will focus
exclusively on IKEA's home furnishing division.

IKEA is a multinational corporation that designs and manufactures, among other things,
furniture, kitchen appliances, and other home accessories. It was established in 1943 in Sweden
(Ehsan et al., 2016). Since then, it has expanded into many countries around the world, selling
their products. It is up against a slew of competitors in a variety of industries that sell similar
products. To counteract this in the market, the company has implemented several marketing
strategies that give it a competitive advantage. The strategies worked well, resulting in a positive
performance result. It has seen an increase in sales, which has been accompanied by an increase
in profits. This has occurred as a result of the strategies and tactics employed. The company also
has plans and schedules that guide it on the right path to achieve its goals. This essay will
concentrate on the marketing strategies used by IKEA in the market, which have resulted in
positive market performance.

1.2 Ikano Pte. Ltd as a franchisee of IKEA

Ikano Pte. Ltd. is an Inter IKEA Systems B.V. franchisee that owns and operates two IKEA
stores in Singapore, one in Kuala Lumpur, Malaysia, and one in Thailand. Additionally, Ikano
Pte. Ltd. owns and operates shopping malls adjacent to IKEA locations in Kuala Lumpur and
Bangkok (opened in May 2012). Ikano was originally a division of IKEA, which was founded in
1943 by Ingvar Kamprad. Today, the Ikano Group owns and develops niche businesses in
finance, real estate, asset management, insurance, and retail.

1.3 Target Market

IKEA is the industry's low-cost leader. A living room furnished with IKEA products costs up to
66% less than one furnished with comparable products from other retailers. Its target market
consists primarily of young married couples, college students, 20-30 something singles, and
middle-class families who are price conscious. Therefore, if they can obtain furniture at a
significantly lower price, they will do so.

2.0 Product and Services

IKEA sells every day, non-luxury items that have numerous substitutes and complements on the
market, including Harvey Norman and Courts. Additionally, it offers a variety of services to
complement its business, including delivery, assembly, kitchen installation, and even sewing
services to meet demand.

2.2 Competitor

IKEA does not face any direct competition in terms of innovation. Although the company has
been around for a long period of time, they continue to develop modern designs to meet the
changing tastes and expectations of customers. Unlike IKEA's indirect competitors, such as
Macy's, Harvey Norman, Courts, and small and medium furniture stores such as Lorenzo,
Rozelle, and Cavenzi, IKEA has been able to establish its brand as more than a furniture
merchant or retailer through distinctive design and style. According to a report by the Malaysian
Furniture Association, the country currently has 2,531 furniture stores ranging in size from large
to small.

A perfectly competitive market exhibits three distinct characteristics: it has a large number of
buyers and sellers, homogeneous goods, and unrestricted entry and exit into and out of the
market. There are numerous buyers and sellers because perfectly competitive firms operate at an
efficient scale, resulting in a high level of consumer surplus, and because sellers can sell as much
as they want at a given market price. Sellers have no incentive to reduce the price of their goods
because doing so would reduce their profits; they also have no incentive to increase prices
because doing so would result in a lack of demand, as consumers possess perfect market
knowledge and are capable of purchasing close substitute goods. Each firm that operates in this
market is a price taker.

A good's price is equal to its average revenue, which is equal to its marginal revenue, because
this is the market price established for each quantity of the good. When a firm's price equals its
marginal costs, it maximizes profits. If a new firm determines that the market is profitable, they
will enter the market. This, however, will increase supply and quantity, lowering prices and
profits for all firms operating in that market. This will inevitably result in some businesses
earning no profit. If this occurs and the price of a good falls below the firm's average total cost of
production, the firm may decide to close.

3.0 Special Characteristic of IKEA

3.1 Mass Production

The advantage of mass production is that IKEA can achieve economies of scale while still
meeting the performance objective's cost. On the other hand, the inventory level is high, which
means that IKEA's products are made-to-order (MTS). Individual orders are not assigned to
customers during the manufacturing process in a make-to-stock process (Schroeder, 1933).
IKEA has reduced their average long-run cost by leveraging economies of scale through
increased specialization over the last year. The division of labor has been delegated to specific
products manufactured by specialized workers in various locations throughout the world.
According to Dolgui & Proth (2010), mass production reduces human error through operation
standardization.

3.2 Integrated Supply Network

To avoid inefficiencies associated with outsourcing, IKEA establishes manufacturing operations

in wholly owned subsidiaries. To maintain its design capabilities and distribution and retail
network, which enable IKEA to offer well-designed items at bargain prices, IKEA has reached
another milestone in international procurement. Its products are designed and engineered in
Sweden and manufactured by external subcontractors in more than seven countries, most of
which have access to cheap labor, close proximity to raw materials, and reliable distribution
channels (Navareti, 2004). The majority of production takes place at the suppliers' facilities,
which means that IKEA is ordering 10,000 hours of production rather than 10,000 wardrobes.

3.3 IKEA Brand Recognition

Since the company's inception in 1943, IKEA has grown into a successful global network of
stores through its innovative retail concept. According to Business Week, the retailer controls
between 5 and 10% of the furniture market in each of the countries where it operates. According
to the former CEO, 'our brand's awareness is much greater than our company's size.' That is
because IKEA is much more than a retailer of furniture. It sells a way of life that customers
worldwide embrace as a sign that they have arrived, that they have good taste, and that they
understand value.

Wherever they are, customers frequently view their visits to the store as more than a necessary
evil. According to a Harvard Business School study, IKEA employs a clever strategy to keep
customers inside their stores for as long as possible. For instance, at IKEA Malaysia, patrons can
drop their children off at the playroom directly outside the entrance, an amenity that encourages
additional shopping. The patrons then follow a marked path through the warehouse, and because
the store is designed in the shape of a circle, they can see everything as long as they stay in one
direction. Patrons can inspect merchandise without obstructing traffic, and the furniture is
arranged in fully accessorized displays. A completely lifelike shopping experience that combines
tangible goods and intangible experiences has unmistakably differentiated IKEA from its
competitors in the market.

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