Case description:

IKEA.

Design for everyone. A brief history. Like its founder, Ingvar Kamprad, the IKEA concept was
born in Småland, a small town in the Swedish countryside. In this region of Sweden, the land
is poor, the people are known for being hard-working, living on a shoestring and using their
imagination to make the most of the limited resources at their disposal. It is this way of
doing things that IKEA uses to keep prices down. IKEA was founded in 1943, by which time
Sweden was becoming an example of a society with a social vocation, where both the rich
and the poor are cared for. In 1955 IKEA began to design its own products, as competition
pressured furniture suppliers to boycott IKEA, forcing IKEA to design its own furniture. In the
same year, one of the first IKEA employees came up with the idea of removing the legs from
a table to fit in a car to prevent damage in transport. From there, "we started thinking in
terms of flat packing. This led to further reductions in the final price to their customers.
Because with this packaging system, less storage space is needed, labour costs are reduced
and transport damage is avoided". In 1958 the first IKEA shop opens in Älmhult, Sweden. In
1965 the IKEA flagship shop opens in Stockholm, a 45,800 m2 shop with a circular design
inspired by the Guggenheim Museum in New York. The success created huge capacity
problems in serving customers. By opening the store and allowing customers to serve
themselves, an important part of the IKEA concept emerged. Today it has 163 shops in 31
countries, employing more than 65,000 workers worldwide. In its shops you can find
products such as kitchen and dining room accessories, carpets, wardrobes, bookcases and
chests of drawers, accessories and decoration for bathrooms and kitchens, bedrooms, lamps,
tables, summer furniture, chairs and stools, sofas and armchairs or textiles. More than a
company, a lifestyle. People with different needs, tastes, dreams, aspirations and purchasing
power. But offering a wide range of beautiful and durable furniture at low prices is not so
easy. That's why IKEA has sought direct collaboration with the customer, to find out what
they want, then its designers shape the ideas, and by collaborating with expert
manufacturers, they make the most of the raw materials, adapt production processes to
save costs, buy raw materials in large volumes, then the customer collects the products in
the shop, transports them in flat packs and assembles them at home himself, without
reducing the quality of the final product at all, as the cost savings have a direct impact on the
price the customer pays. IKEA's organisation was built around four functions: product range,
purchasing, distribution services and retailing. Ikea aims to get to know all the needs of its
customers and then eliminate any costs or activities from its offer that do not fit them.
Customers come from a wide range of lifestyles, from new homebuyers to business
executives looking to expand their offices. They all expected stylish, high quality furniture
that was reasonably priced and readily available. The product development process has
three objectives: affordability, design and functionality. When developing a new product, a
cost calculation is added to the sketch of the product in order to make it at a low price. The
creation process involves the designers, the product development group and the purchasing
managers who meet from the beginning to discuss materials, shapes, colours and suitable
suppliers. Each brings their specific expertise to the table. The development of a product is
never finished, it is always open to further modifications, in its shapes, its packaging
conditions, etc. The IKEA assortment consists of about 12,000 products. IKEA reinforces its
commitment to quality by offering a 10-year guarantee on most items. To ensure that it has
quality suppliers, who comply with its company philosophy, it has developed a code of
conduct which expresses the minimum requirements expected of all suppliers. Distribution
management and sales outlets.
IKEA shops are located on greenfield sites on the outskirts of towns (the price of land is
lower on the outskirts) with easy access from town centres, which helps to keep the price of
products as low as possible. Furniture items are displayed in model rooms in the shops, so
that customers can try them out. In addition, supervised children's activity areas and cafés
are provided where customers can sample Swedish cuisine as well as learn about Swedish
culture. Product presentation in the shops is important. It is not only about displaying
products, but also about serving as a source of inspiration with clever decoration solutions.
The customer, by picking up the products in the store, taking them home and assembling
them himself according to the instructions, contributes to the affordable prices. Products
arrive at IKEA shops packed on pallets. The packaging is collected and recycled. In each
country where IKEA is located, IKEA takes action for the common good of society. In addition
to prohibiting children from working in its suppliers' factories, IKEA funds scholarships, helps
to run forestry courses, participates in campaigns to identify forests to protect, and so on.
Internet IKEA has been on board since its commercial explosion in 1995. Today, from its
global website www.ikea.com you can access 32 websites with local and personalised
information from as many countries, and from each of these websites you can access: - The
activities and news from IKEA shops - Information about the shops: location, access, services,
opening hours, etc. - General information about the company - Annual IKEA catalogue and
brochures freely downloadable from the website - Job opportunities at IKEA: job vacancies.
The IKEA website has several planning tools (for kitchens, desks, wardrobes, etc.), which
allow the user to recreate the desired end product. In addition, they have developed an e-
commerce platform from which the e-commerce service is already offered in most of the
countries where it is present.

QUESTIONS.

1. What are the main macro-environmental variables that you consider currently influence
IKEA's activity? Give reasons for your answer.

2. What do you consider to be the keys to IKEA's success, its USP and market positioning?

3. Provide Ikea´s Marketing mix (4Ps) variables description, provides reasons for your
statements.