ANALYSIS OF IKEA BASED ON SERVICE MARKETING MIX STRATEGIES

INTRODUCTION:

IKEA is the world-leading design-

sell and ready-to-assemble
furniture, applicants
IKEA is the world-leading design-
sell and ready-to-assemble
furniture, applicants
IKEA is the world-leading design-sell and ready-to-assemble furniture, applicants and accessories retailer, it
was established in Sweden in 1948 and grown since then to have 433 stores, 211,000 co-workers in 50
countries and generating annual sales of more than 41.3 billion euros in 2019 (IKEA, 2020). IKEA is 39th
world top brand with $15.3 B value (Forbes, 2019). IKEA adopts Franchising that gives the company
the ability to grow internationally, maintain an entrepreneurial spirit, safeguarding underlying concept and
serve their and people’s best interest (IKEA, 2020).

Fig. (1) IKEA Logo Transformation

They own and operate stores in only 24 countries only, the remaining stores are
franchised (Shoulberg, 2018) for 3% of franchisees annual net sales (IKEA, 2020).
 Fig. (2) IKEA Global Presence

Franchising system enabled IKEA to grow steadily, develop their concept, lay a solid
foundation for their brand, increase their sales up to 41.3 billion Euros in 2019, and
exploit economies of scale and to manage and keep IKEA’s attractive prices and
global reach (IKEA, 2020). Additionally, IKEA’s enjoys a strong supply-chain that
contains 1,800 suppliers in 50 countries and uses 42 trading service offices
worldwide (TradeGecko, 2018).

Fig. (3) IKEA Group Activities and Sectors

5
IKEA’s vision is to create a better everyday life for people; they are targeting a better
every day for all people impacted by their business by offering a wide range of well-
designed, functional home furnishing products at prices so low that as many people
as possible will be able to afford them (IKEA, 2020).

Quality products at low prices.

The products are made from quality materials, keeping up with the current trends and the needs of the
consumers, and sold at affordable prices.

People & Planet.

They are working towards having positive impact on both, people
and the planet.

When people grow, IKEA grows too.

They believe that their co-workers are essential for their continued
growth. They see every person as a talent with the possibility to
develop.

RESEARCH METHODOLOGY:
Research methodology is the specific procedures or techniques used to identify, select, process, and analyze
information about a topic.
The paper, being on the 7Ps of Marketing, mainly focuses on the Qualitative side of the data. Some numbers
will be considered for the justification. The impact of ideas, experiences and meanings is difficult to describe
in numbers which is why I have decided to go with Qualitative data. It is flexible and adjustable to the
introduction of new knowledge.
The data I will be using will be secondary in nature. With the help of secondary data which I have collected
from trustworthy websites, articles and papers, I have been able to cover data that spans over longer
timescales and broader geographical locations. It also allows me to present the data with a greater insight
and better accuracy.

DATA ANALYSIS, INTERPRETATION AND PRESENTATION:

IKEA has been recognised globally because of their market practices. Being a cost-conscious company, they
believe in delivering products at affordable prices so their marketing expenses are optimised, and not
extravagant. Their marketing mix varies depending on the campaign and the intent is always to maximize
reach, impact, and engagement. They usually deploy a mix of traditional and new age/ online media, PR and
owned channels like the website. The mix also varies from one campaign to another, depending on the
objectives and the insights. The co-workers are also considered as an important part of our communication
plans so as to have a very approachable environment.
Even for India, having such a vast and diversified consumer base, with a wide range of 7500+ products, they
have something for everyone irrespective of their demographic they belong to.
IKEA continuously develops new products to sell to their existing markets. They invest heavily in R&D,
using unique franchising model and strategic partnerships. They also seek to find new markets. Investing in
technological solutions, consumer engagement, they tend to enjoy a competitive advantage over their
competitors.
With the help of SWOT Analysis (related to Marketing), we can have a better understanding of the 7Ps.
STRENGTHS WEAKNESSES

Innovative and functional designs, long term Weak promotional techniques, poor balance of
planning, huge automated distribution centres, low-cost products and good quality, remotely
ability to furnish the entire home, adapting local located locations, remotely complicated furniture
market tastes, cost leadership, economies of scale, assembly, high delivery and assembly prices.
strong franchising system, strong global brand,
product standardization, aggressive approach to
sustainability.

OPPORTUNITIES THREATS

Brand visibility improvement, strengthen their Emergence of substitute products, increased

marketing activities, strengthen their online competition, increased trade barriers, shift in
shopping experience, introduction of furniture consumer tastes, shortage of skilled workforce,
assembly training in their existing platform, damaged reputation due to series of incidents.
worldwide demand for greener products, possible
worldwide expansion, opportunities in R&D and
innovation.

Marketing Mix of IKEA:

1. Product:
Ikea, from the very beginning understood the needs of its customers and target prospects, and studied the
potential of this segment and provided variety of options to the customers, so that they were highly attached
and heavily relied upon its name thereby propelling its popularity even further. It 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. Apart from being wide in terms of function, the product range is also
wide in terms of styles. From several types of home furnishing products, you can find an equally wide
choice of styles at the IKEA stores. These products are primarily focused at the tastes and needs of the
customers. 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. So, the
product range varies from one country to another.
There are products for every kind of customer at the IKEA stores from the romantic to the minimalist.
Irrespective of your preferred style, there is always something that matches your style and choice available at
IKEA. While good quality products are found in the market for high prices generally, at IKEA such product
s can be available at affordably low prices. However, that does not mean that the raw material used is of
cheap quality. IKEA relies on design innovation to bring only great quality and beautiful designs to the
market and its stores. It has developed cost efficient and innovative methods to match people’s expectations
of price and quality.
IKEA brings product to the local market after researching the local cultures and people’s lifestyles.
Ikea has continuously kept changing with a change in the business environment. The designs have always
been fresh and this was the major point of differentiation for Ikea. Ikea is a brand that has broadly
differentiated and has not depended upon a solitary classification of items or administrations for its
extension. The key for Ikea has been to give the business a wide assortment of items and administrations
to satisfy their particular aspirations and to defeat the obstructions or impediments of confined classes. Its
wide range of products includes the following product categories:

 Eating
 Desks
 Mirrors
 Children’s IKEA
 Cooking
 Bathroom storage
 Beds & mattresses
 Chairs
 Clothes storage
 Decoration
 IKEA FAMILY products
 Kitchen cabinets & appliances
 Lighting
 Small storage
 Sofas & armchairs
 Storage furniture
 Swedish food
 Tables
 Textiles & rugs
 Tools & hardware
Wide range of products for each and every need of consumers can be found with ease. Consumers with a
preference for minimalism, modernity, contemporary, etc can all find products which cater to their tastes.

2. Price:
IKEA competes with various global retail chains as well as local supermarkets.
Presently the evaluating piece of Ikea is a sort of non-kind because of its administrations and
their individual nature, as it has been into a monopolistic business, with simply a couple of contenders and
greater part of piece of the pie stills to support it. In such a condition, in the same way as another
organization or business holding, Ikea additionally has embraced a methodology which is most suited, and
that is of not cutting costs to strip the brand of its esteem, and in the meantime, not to be obviously
overpriced, in order to repulse the business sector strengths. In a comparative manner, Ikea has been
consistent and has taken after the centre way in evaluating its administrations and this methodology has
created it to flawlessness. However, it is a point of appreciation for Ikea, that even after being at the top, Ikea
offers fantastic products at low prices. Low prices constitute the IKEA vision, business idea and concept.
IKEA makes low-cost furniture for household and offices. It focusses on cost control and efficient
operational details. This allowed IKEA to lower its prices over the decade to 2010 during a period of global
expansion. IKEA allows not only lower prices but also freebies at the IKEA restaurant form Monday to
Saturday.
At the deep discounters like Aldi, one may come across even lower prices. However, the IKEA customers
are generally more satisfied with the prices they are paying. It is because of the quality. IKEA matches
prices with product quality. IKEA products are not expensive but they are not too cheap either. It also uses
flat packing to save on the shipping costs.   Still, when compared to the competitors like West Elm or Bed,
Bath and Beyond, the IKEA products come at much affordable prices.
Considering the quality, how is it that IKEA is able to sell their products at such low prices? It is because of
a method called “Flat Packing”, now synonymous with IKEA that cuts costs by letting consumers purchase
their furniture in pieces and assemble it themselves. While it may be annoying to assemble furniture
yourself, it allows IKEA to charge less for everything.

- IKEA chooses what it wants to sell a product for, and then designers work with suppliers to make
that happen.

- IKEA explains on its website that it constructs its furniture by layering sheets of wood over a
honeycomb core. This type of construction saves IKEA money, so it can price its furniture lower.
- IKEA makes everything in bulk. By making so many of everything, it is able to get discounts on
production and keep the prices lower.

- Everything is packed completely flat, so it costs less to store and transport it.

- IKEA doesn’t have a ton of store associates at each store. By hiring a few people, IKEA is able to
save money and keep the prices lower. In lieu of hiring more people, important information of
products is usually on the price tag.
 - You have to take furniture home yourself. It may not be the most convenient option, but it means
you won’t be paying a delivery fee. It also means you won’t pay higher prices that make up for
free delivery.

- Assembling IKEA furniture can be daunting, but it means IKEA isn’t paying anyone else to do it
for you. IKEA acquired TaskRabbit in 2017, giving the option to shoppers to hire someone else
to assemble their furniture.

3. Place:
Traditionally, its stores were located on the fringes of the towns to provide people with a calm and relaxed
environment for shopping. However, recently it has altered its strategy and adopted two new store model
that are located inside the towns in busy areas. Its smaller stores located inside town display a limited range
of products. There are bigger stores at city centers that display a larger range of products. IKEA has got an
excellent place and distribution strategy as a part of its marketing mix. Distribution is based on the following
principles. IKEA has a global distribution network i.e., a large distribution network. It has huge volumes on
manufacturing side and flat packages i.e., it is useful in increasing value to weight ratio. IKEA has 433
stores in 50 countries, all their showrooms are large and located out-of-towns with restaurants, food shops
and Swedish market and children play area (IKEA, 2020). IKEA’s supply-chain contains 1,800 suppliers in
50 countries and uses 42 trading service offices worldwide (TradeGecko, 2018). Approximately 22% of our
range produced in China (IKEA, 2020).  Procuring materials in proximity with supply chain to reduce
transport costs and using more of ocean transport than road transports by building DCs in proximity to ports
are some strategies adopted by IKEA. Products are transferred from suppliers to IKEA stores directly. This
reduces handling costs, reduces transport and lowers the carbon footprint. Also, warehouses are attached to
the retail stores. Apart from them it has introduced pick up points for customers placing orders online. Its
online sales have kept growing through years and in 2016, they took a substantial leap. To make its brand
even more accessible, the brand has also decided to increase the number of pick up and order points.
However, the most important part is how its stores are design. These maze-like stores are so beautiful and
cozy inside. There are cafes that serve affordable but good quality food. Model homes inside these stores are
a good source of interior decoration ideas for the customers.
IKEA only grants rights to become a franchisee in markets where rights have not already been given,
thereby maintaining their exclusivity. When selecting franchisees, IKEA among other things, evaluates the
following:

- Experience.
- Local market knowledge and presence (able to demonstrate ability to establish and operate IKEA
stores nationally).
- Corporate culture and values.
- Financial strength and ability to carry through the investment penetrating a country in full and in
a large-scale retail environment format.

4. Promotion:
As expected from a consumer durable brand,
Ikea uses all form of promotions. However,
due to its popular brand name, and
its pricing structure, the best promotions
which bring results for Ikea are sales
promotions and trade promotions. Thus, this is
where Ikea concentrates the most.
Using coupons, price discounts, festival
promotions, and all other marketing
gimmicks in their bag, Ikea ensures that customers get regular advantages from various deals offered by the
large-scale manufacturer. Further to BTL promotions, Ikea uses ATL medium like Newspapers, Television
as well as Digital media. The print ads of Ikea are known to be smart and to the point which grabs customer
attention. As they have a presence in varying geographies, the communication too differs from the company.
It also publishes and distributes different catalogs to different markets. These catalogs can also be found
online and accessed through an app. Apart from it, IKEA utilizes other channels including both traditional
and digital to market its brand. Social media is also an important tool used by IKEA for brand and product
promotion. From time to time, it has also used public relations campaigns to gain publicity and increase
popularity. However, the digital channels are now more in use for promotion and advertising.
They focus on localised communication in their advertising so that they connect to the local audience.
However, in general Ikea is a smart marketer and their product itself speaks volumes. The promotions
support the products by making them look desirable and unique in their design.
IKEA launched a UK-wide advertising campaign which was named home is the most important place and
used signs like "Not for Sale" written on them as a part of the campaign. A subway train imitating IKEA in
style was featured in Novosibirsk. An advertising campaign was launched to gauge whether men or women
are worse at home. Campaign starts advertising a shot in live audience, starring four stand-up comedians,
two men and two women, debating which gender is worse. The idea behind the campaign is that a social
clutter leads to a conflict which can be avoided according to IKEA. Meanwhile, online advertisements
promoted IKEA products demonstrating the problems faced by people, and offering solutions.
 5. People:
IKEA gives utmost importance to the people, ie its customers and employees. Employees at IKEA believe in
the idea that they are straightforward people with passion for home furnishing. The employee culture is
based on togetherness, enthusiasm and fun. Customer satisfaction is at the core of the values. There are
116000 employees in retail, 18000 in supply 21000 in production as of 2015.It does not discriminate on the
basis of race, ethnicity and religion. In 2016 the employee base of IKEA has increased to 183,000.

6. Process:
IKEA has several business processes in place. It has 44 production units scattered across 10+ countries.
IKEA makes its own wood by owning sawmills and produces high quality furniture. It has in house
production facility with highly developed technologies. It follows the clean environment slogan. IKEA has
the most unique supply chain and inventory management techniques. Its designs are differentiated in terms
of price. It almost buys products from 1800 suppliers. IKEA itself gives a code of conduct to manufacturers
that states rules and guidelines which help them reduce their checks for environment friendliness. Further the
finished product is delivered in pieces to be assembled by customers which saves cost.

7. Physical Evidence:
IKEA has 350+ stores in close to 50 countries. Physical evidence for IKEA is its huge store layouts which
provide more than just a shopping experience. It has specific path layouts once you enter the store and guide
arrows which help you to your desired item. Stores are also equipped with restaurants for refreshments and
also baby handling areas for mothers. Also, it provides large parking space as most of the stores are located
outside the cities in large areas. Most of the stores have an area at the end where used, returned, damaged
products are sold under huge discounts. One of the largest stores are located in Sydney and Montreal.